No withholding tax is levied on loan interest

However, if the loan is secured by a mortgage on German real
estate or on a German ship, the foreign lender is seen as having earned income
from leasing or rentals rather than from interest on a loan. This renders him
liable to German trade and corporation taxes on the income net of all relevant
expenses (and he is therefore required to file tax returns as a non-resident), but
the tax actually levied (including the solidarity surcharge) may not exceed the
maximum rate of withholding tax on interest laid down in the relevant treaty.

Similarly, interest on convertible bonds or on profit sharing loans is subject to a
dividend withholding tax under domestic law and is therefore only not taxed by
withholding where the treaty recognises it as interest chargeable at a nil rate.