Domestic withholding taxes are not final
Investment income apart, these domestic withholding taxes are not final
burdens, unless the taxpayer does not file a tax return. Any resident taxpayer
may file a tax return; those whose only income is from a single employment are
not obliged to do so.
Withholding taxes on payments abroad are in most cases restricted or
eliminated by double tax treaty or by the provisions of the EU
Parent/Subsidiary Directive. German law in isolation foresees withholding tax
of 30% on directors’ fees, 25% on dividends and 15% on royalties and sporting
or artistic income. There is also a provision allowing tax offices to order a
withholding tax of up to 25% on other payments to foreigners where there are
specific grounds for fearing a loss in tax revenue. There is no withholding or
similar tax on the repatriation of branch profits or on most interest payments.