Withholding tax is not reduced by the EU Parent-Subsidiary Directive

Upon application to
the German Federal Central Tax Offce, 40% of the withholding
tax may be refunded, provided the recipient is a corporation from
a German tax perspective and fulflls the activity requirements
under the anti-treaty/directive shopping provision. As a conse-
quence the corporation pays tax at the final rate of 15%, which
refects the corporate income tax rate.

If the shareholder of the distributing corporation is a partnership,
the dividends are taxed for corporate or income tax purposes
at the level of the partners and not at the level of the partnership.

When dividends are distributed to an individual, the distributing
corporation must withhold 25% withholding tax (plus solidarity
surcharge). Where shares in the corporation are held as private
assets by a resident taxpayer, the tax withheld on the income
from capital is generally final when withholding tax has been
deducted (so-called final withholding tax), regardless of the tax-
payer’s personal income tax rate. Upon request, the taxpayer’s
personal income tax rate can be used as a basis for taxation if it
is benefcial for the taxpayer.