Germany provides for foreign tax relief via unilateral provisions and through double taxation agreements (DTA's) with foreign jurisdictions.
In general, German resident tax payers are able to claim a credit for foreign income taxes paid up to the amount of German corporate income tax payable on the net foreign income less related expenses. A deduction may also be claimed for foreign income tax paid instead of a credit.
Excess credits may not be carried forward or back, or used to offset other taxes.
Below is a summary of the available methods for various income tax streams based on domestic law.
The credit column shows the type of foreign tax credit granted when the receiving country receives a payment. Four abbreviations are used for the type of foreign tax credit available:
- NC means no credit but foreign withholding taxes can be deducted.
- OC means ordinary credit, i.e., credit for foreign withholding taxes (e.g., withholding taxes).
- IC means indirect credit, i.e., credit for underlying corporate taxes as well as foreign withholding taxes.
- ND means no credit and no deduction for any foreign withholding taxes incurred.