DT7908 - Germany, Federal Republic of: dividends: rates

Under the EU Parent/Subsidiary Directive, dividends must be paid gross to a company resident in the United Kingdom that holds at least 25 per cent of the capital of the German company paying the dividend.

The level of capital required to obtain this 0% rate is reduced to 20 per cent from 1 January 2005, 15 per cent from 1 January 2007 and 10 per cent from 1 January 2009.

For other dividends, the agreement provides for a maximum rate of 15 per cent. This qualifies for credit as a direct tax (seeINTM165010(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.

Where the recipient of the dividend is a United Kingdom company controlling directly or indirectly at least 10 per cent of the voting power in the German company paying the dividend, credit is also available for the underlying tax (see INTM164010(d))