- July 6, 2022
- Posted by: Bastion team
- Category: World News
A new report (the Report)1 published by the German Federal Ministry of Finance (the MOF) suggests that there may be some forthcoming relief for taxpayers impacted by a nearly century-old tax provision which requires extraterritorial withholding tax on certain royalty payments between non-resident taxpayers. The MOF previously published a circular (the Circular), confirming its position that German withholding tax (at a rate of 15.825%) is due and payable on royalties that are payable or that have been paid to a non-German tax resident recipient, even if:
- The licensee is not tax resident in Germany, and
- The only nexus to Germany is that the intellectual property (IP) rights underlying the royalties are entered in a German public register.
The licensee is required to withhold, declare, and remit German tax unless a treaty-based (or European Union Directive based) exemption certificate has been issued to the licensor by the German tax authorities. With respect to payments made in 2013 and later, without a certificate, but where a treaty clearly applies, the German tax authorities introduced a “simplified procedure” whereby licensors could apply to the Federal Central Tax Office for a certificate of exemption which would apply to past payments. Other simplifications were later introduced to allow taxpayer to apply for general exemption certificates covering a group of separate license arrangements at a time. The US-Germany treaty and most other German treaties…