Applying for (partial) exemption from German capital gains tax for foreign corporations

If you would like to be exempt from German withholding tax on investment income, you can obtain an exemption certificate under certain conditions.

Foreign recipients (creditors) of investment income can, in special cases, be entirely or partially relieved by exemption from capital gains tax (KapSt).

A tax exemption certificate can only be issued to a foreign-resident corporation that holds a direct interest of at least 10 percent in an unlimitedly tax-liable distributing corporation.

The exemption from withholding tax on capital gains may be excluded in certain cases (for example, in the case of shell or substance-less companies). This rule is thus directed against tax arrangements that attempt to achieve relief from withholding tax on capital gains by exploiting treaty or directive benefits.

You submit your application for exemption from German withholding tax on capital gains in writing to the Federal Central Tax Office (BZSt).
 

You must submit the application for exemption in writing to the Federal Central Tax Office (BZSt), Unit St I B 3.

• Download the application from the BZSt website. Fill out the application electronically. Print it out and sign it.
• The tax authority of the foreign state must confirm the residency.
• Then send the application and all documents by mail to the headquarters of the BZSt in Bonn.
• Your application is being processed and reviewed by the BZSt.
• You will receive a tax exemption certificate or a notice of rejection of your application by mail.
• In the event of the issuance of an exemption certificate, the distributing corporation (debtor) may, if the exemption certificate is available, refrain entirely or partially from withholding tax from the outset.
   

Application: The validity of the exemption certificate begins at the earliest on the day the application is received by the Federal Central Tax Office (BZSt)

Validity of the exemption certificate: at least 1 to a maximum of 3 years, after which a new application must be submitted
 

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Section 50c (2) of the Income Tax Act

• Objection
• Action before the financial court