The repatriation of profits is defined as the process of converting a foreign currency in the currency of the country one will remit profits in. The repatriation of profits is usually employed in case of branch offices or subsidiaries of foreign companies in Germany remitting incomes to their parent companies in other countries. The amount repatriated will vary depending on the exchange rate between the two currencies.
Our lawyers in Germany can explain the taxation regulations applied to foreign companies operating within the country.
The German corporate taxation system is comprised of the trade tax and the income tax applied to corporate profits. The corporate tax will also be subject to a solidarity surcharge of 5.5% on the total amount. With respect to the tax rates, the corporate tax rate is 15%. Foreign companies operating in Germany are also subject to the 15% tax rate. However, there are special rules for the taxation of permanent establishments under Germany’s double taxation agreements, but also for foreign companies operating in the country without hiring personnel. With respect to the trade tax, it is collected at municipal level and its rates will vary. Dividends received by German companies are usually exempt from taxation.
Foreign companies may repatriate the profits generated by their German branch offices freely. Germany does not impose any branch profit tax. With respect to the dividends, they can be repatriated after the company has been taxed in Germany. However, if the recipient is a German tax resident, no dividend tax will be withheld. The dividend tax rate is 20% and the solidarity surcharge. However, under Germany’s double taxation treaties the rates can decrease to 15%, 10% or 5%. As a member of the European Union, Germany falls under the regulations of the Parent-Subsidiary Directive which allows companies registered in the EU to benefit from dividend tax exemptions.
For complete information about the taxation of foreign companies and additional information about profit repatriation, please contact our law firm in Germany.
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