Seller of shares in a corporation is not a resident in Germany

If the seller of shares in a corporation is not a resident in Germa-
ny, the gains on the sale are subject to non-resident tax liability
only if the shareholding is substantial (i.e. A direct or indirect
holding of at least 1% within a fve-year period before the sale
at any point in time).

No tax liability arises in Germany for the
sale of shares in a domestic corporation if the non-resident seller
holds less than 1% of such corporation, regardless of whether
the shareholder is an individual or a corporation. A foreign
corporate shareholder whose gain on the sale of shares in a
German corporation is taxable will beneft from the capital gains
exemption, as the sale of shares in a corporation by another
corporation is exempt from corporate income tax. However,
since 5% of capital gains qualify as non-deductible expenses for
corporate income tax purposes, effectively 95% of the capital
gain is tax-exempt (§ 8b (2), (3) KStG).

When the foreign seller is an individual or a partnership with
individuals as partners, the gain on the sale is subject to the
partial-income rule, whereby 60% of the gain is subject to
income tax. Germany’s tax treaties typically allocate the right to
tax capital gains on the sale of shares to the seller’s country of
residence.