Profits earned by German-resident corporations

This old system made the corporation tax payable by the company dependent on its distribution policy
and also gave a credit against a resident shareholder’s own income or
corporation tax in the amount of the equivalent corporation tax previously
borne by the company. Under the changeover provisions, companies with
retained earnings taxed under the old system established their remaining
imputation tax credit at one-sixth of the old taxed retained earnings still
undistributed on December 31, 2006. This credit is being paid out in ten equal
annual instalments from 2008 to 2017.

A corresponding provision applies to retrospectively tax the distribution element of any remaining old system
untaxed retained earnings of domestic source on December 31, 2006; the total
burden is taken at 3% of the nominal amount, to be paid in 10 equal annual
instalments from 2008 to 2017. September 30 is the due date for both credit
and additional levy. Neither bears interest, though there is a provision for
voluntary early payment of the remaining levy instalments at a discount of 5.5%
for each remaining year outstanding.