Tax on capital income deducted at source
Capital income includes income from e.g.
- Dividends;
- Income from the sale of securities;
- All interest earned;
- Income from jouissance shares;
- Income from futures and
- Income as a sleeping partner.
A liability for tax arises at the point at which the capital income accrues to the creditor. Tax must be deducted by the debtor or agent paying the capital income for the creditor's account at this time.
The uniform tax rate is 25% (plus the solidarity surcharge). The tax usually has a compensatory effect for private individuals resident in Germany.
Under certain circumstances, no withholding tax will be deducted for domestic taxpayers, e.g. by the grant of an exemption order (Freistellungsauftrag) or by submission of a non-assessment certificate (Nichtveranlagungsbescheinigung).
Withholding tax will also be deducted in the case of many capital yields by individuals and businesses domiciled abroad. An application for relief from German withholding tax may be made to avoid double taxation of dividends and some capital income which may not be taxed or only taxed at a lower rate in Germany under a double taxation convention.
In the case of dividends paid to businesses domiciled in a state with which no double taxation convention exists, an application may be made for withholding tax to be reduced to 15%. For further information please see the chapter Relief from withholding tax.
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