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9.1. Unilateral and Treaty Based Methods Available for the Elimination or Mitigation of Double Taxation

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.

Royalty Copyright OC
Capital Gains NC
Dividends NC
Interest OC
Royalty Patent OC
Sales OC
Service Management OC
Service Technical OC
Royalty Trademark OC

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.