Bilateral Taxation Treaties
Taxation of U.S. Firms within Germany is governed by the “Convention for the Avoidance of
Double Taxation with Respect to Taxes on Income.” It has been in effect since 1989 and was
extended in 1991, to the territory of the former German Democratic Republic. With respect to
income taxes, both countries agree to grant credit for their respective federal income taxes on
taxes paid on profits by enterprises located in each other’s territory. The German system is more
complex, but there are more similarities than differences between the German and U.S. Business
tax systems. A Protocol of 2006 updates the existing tax treaty and includes several changes,
including a zero-rate provision for subsidiary-parent dividends, a more restrictive limitation-on-
benefits provision, and a mandatory binding arbitration provision. In 2013, Germany and the
United States signed an agreement on legal and administrative cooperation and information
exchange.
Germany has bilateral treaties with respect to taxes on income with a total of 97 countries.
Germany has initialed new income tax treaties with Costa Rica, Oman and Turkmenistan which
are not yet in force. Income tax treaties are under negotiation with Jordan, Qatar, Columbia, and
Libya.
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