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HMRC internal manual

Double Taxation Relief Manual

HM Revenue & Customs
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Double Taxation Relief Manual: Guidance by country: Germany, Federal Republic of: Dividends

Under the EU Parent/Subsidiary Directive, dividends must be paid gross 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.

For other dividends, the agreement provides for a maximum rate of 15 per cent (reduced to 10 per cent where the beneficial owner of the dividends is a pension scheme). This qualifies for credit as a direct tax (see INTM165010 (C)). The reduction to the above rates is not given where the dividend is “effectively connected” (see INTM153110 fifth sub-paragraph) with a permanent establishment or fixed base which the United Kingdom resident recipient has in Germany.

The German tax deducted from dividends at the agreement rate qualifies for credit as a direct tax (see INTM164010 (C)).

A United Kingdom company controlling, directly or indirectly, at least 10 per cent of the voting power in the German company paying the dividend is entitled, under the agreement, to credit for the underlying tax (see INTM164010(d)) Article 23(2)(b).