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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: Germany, Federal Republic of: Treaty Summary

The table summarises the provisions of the treaty in force. Where a percentage rate is shown, this rate is the ‘treaty rate’ and does not reflect taxes chargeable under the domestic law of either state before relief is given under the provisions of the treaty. The ‘treaty rate’ is the maximum rate at which the UK and Germany are permitted to tax income in the relevant categories under the treaty. Rates chargeable under the domestic law of either state may be higher or lower.

In all cases other conditions for relief (e.g. beneficial ownership) will have to be met before relief is due under the treaty. The text of the treaty itself should be consulted for the full details.

Portfolio dividends 15% (note 1 and 2) Article 10
     
Dividends on direct investments 5% (note 3) Article 10
Conditions for lower rate on dividends on direct investments The beneficial owner must be a company which holds directly at least 10% of the capital of the payer Article 10
Property income dividends 15% Article 10
Interest 0% (note 2) Article 11
Royalties 0% Article 12
Government pensions Taxable only in Germany unless the individual is a resident of, and a national of, the UK Article 18
Other pensions/annuities Taxable only in the UK (note 4 and 5) Article 17
Arbitration Yes Article 21

 

Note 1: dividends beneficially owned by a UK pension scheme are taxable in Germany at a rate not exceeding 10%.

Note 2: The agreement provides tax deductible interest and dividends arising in Germany that carry a right to participate in profits may be taxable in Germany. Interest and dividends carrying a right to participate in profits include income:

  • derived by a silent partner (“stiller Gesellschafter”) from his participation as such;
  • from a loan with an interest rate linked to borrower’s profit (“partiarisches Darlehen”); or
  • from profit sharing bonds (“Gewinnobligationen”) within the meaning of the tax law of Germany.

Note 3: Under the EU Parent/Subsidiary Directive, dividends paid to a company resident in the United Kingdom that holds at least 10 per cent of the capital of the German company paying the dividend are exempt from tax in Germany.

Note 4: Pensions paid to a United Kingdom resident will be taxable only in Germany where that pension is attributable in whole or in part to contributions which, for a period of more than 15 years, either:

  1. Did not form part of taxable income in Germany;
  2. Were tax deductible in Germany; or
  3. Were tax relieved in some way in Germany.

The provisions of Article 17(3) will not apply if Germany does not effectively tax the pension, if it has already clawed back the tax relief given for contributions or if the 15 year condition is fulfilled in both the United Kingdom and Germany.

Note 5: German social security pensions are taxable only in Germany and are not taxable in the United Kingdom.