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Germany UK Double Taxation Treaty

Germany-UK Double Taxation Treaty

Updated on Monday 14th September 2015

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Germany-UK-Double-Taxation-TreatyThe agreement on avoidance of double taxation between Germany and the UK

Germany has strong trade and investment relations with the United Kingdom which is why the first double taxation treaty between the two countries dates back in 1964. In 2010 the Germany-UK double taxation agreement was updated and it now incorporates the Organization for Economic Co-operation and Development’s requirements about the exchange of tax information. The convention was enforced at the beginning of 2011 in Germany and on April 1st for the corporate tax and April 6th, 2011 for the income and capital gains tax in the United Kingdom.

Profit repatriation according to the Germany-UK double tax treaty

The provisions on withholding taxes of the previous double taxation agreement were revised and new amendments have been introduces with respect to the UK and German dividend, interest and royalties taxes. According to the new treaty, dividends no longer include all rights, meaning a German investment fund will now benefit from reduced rates when distributing dividends to an UK company. The tax rates applied to the distribution of dividend payments have also been reduced:

  • - 5% under the participation exemption clause,
  • - 10% if the recipient is a pension fund,
  • - 15% in all other cases.

The taxation of interests and royalties paid by UK or German companies remains the same, such payments being exempt from taxation in the country they are paid from. However, the interests derived from loans or from profit-sharing bonds will be taxed in the country they are issued in accordance with the local legislation.

The taxation of employment income under the Germany-UK double tax treaty

According to the 1964 double taxation agreement between Germany and the United Kingdom, an UK or a German resident working in the other state for more than 183 days in a calendar year, the employment taxes will levied by the other state. This provision will help certain employees to retain their allowances within the country they work.

A new article was also introduced with respect to the taxation of offshore activities. Article 20 in the convention provides the circumstances a company is considered to have a permanent establishment in the other state where it carries out offshore activities.

For information about all the changes brought to the double taxation agreement with the United Kingdom, please contact our lawyers in Germany.




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