Earnings stripping rules must be observed

For further details on the German
earnings stripping rules, see our extended archive on it.
The tax treatment of a partnership that has shares in a corporation
and receives dividends from such shares depends on the legal form
of the partners of such partnership. When a partner of the part-
nership is a corporation, the dividends attributable to such corpo-
ration are effectively tax-free for 95% of the gross dividends (§ 8b
(6) KStG) if the co-entrepreneur’s notional share in the corporation
amounts to more than 10% .

The minimum notional share of 10% applies to dividends received
after February 28 2013. When a partner of the partnership is an in-
dividual, 40% of the dividends are tax-exempt (§ 3 no. 40d EStG).
Any dividend withholding tax levied either on the corporation or the
non-resident taxpayer is creditable in the assessment procedure.
Should the partnership generate losses, special regulations must
be observed at the level of the partners if such losses are to be
claimed for tax purposes