Nexia Ebner Stolz

Tax Advice

Withholding tax on German registered IP: Simplification rule extended again

The Ger­man Fe­deral Mi­nis­try of Fi­nance (BMF) is of the opi­nion con­siders that the entry of IP into a Ger­man pu­blic book or re­gis­ter re­sults in li­mited cor­po­rate in­come tax lia­bi­lity and a wi­th­hol­ding tax must be de­duc­ted. Howe­ver, a wai­ver rule was gran­ted for this pur­pose, which has now been ex­ten­ded once again.

Ac­cor­ding to the wording of sec­tions 49(1) no. 2(f) and no. 6 of the Ger­man In­come Tax Act (Ein­kom­men­steu­er­ge­setz, EStG), com­pa­nies re­cei­ving pay­ments that are not re­si­dent in Ger­many and lease or rent (li­cense) in­tel­lec­tual pro­perty rights en­te­red in a pu­blic book or re­gis­ter in Ger­many (e.g. a pa­tent or tra­de­mark re­gis­ter) have li­mited tax lia­bi­lity in Ger­many. The tax is eit­her le­vied as a wi­th­hol­ding tax (sec­tion 50a(1) no. 3 of the EStG if rights are trans­fer­red) or by way of an as­sess­ment pro­ce­dure (sec­tion 25(3) of the EStG if rights are sold). The BMF ta­kes the view that no fur­ther do­mestic ne­xus (beyond re­gis­tra­tion in Ger­many) is re­qui­red.

For the first time, the BMF sta­ted in a let­ter da­ted No­vem­ber 6, 2020, that it as­su­mes there is an ob­li­ga­tion to de­duct tax at the source in ca­ses which the IP is en­te­red in a Ger­man book or re­gis­ter. This in­clu­des, for ex­am­ple, roy­alty pay­ments to a for­eign pay­ment debtor for a right re­gis­te­red in the Ger­man tax re­gis­ter, ir­re­spec­tive of whe­ther there is also a do­mestic claim. In a let­ter da­ted Fe­bru­ary 11, 2021, the BMF gran­ted a wai­ver rule, the ap­pli­ca­tion of which was ex­ten­ded in a let­ter da­ted July 14, 2021 to re­mu­nera­tion re­cei­ved be­fore July 1, 2022. Now, shortly be­fore the ex­piry of this dead­line, the BMF is once again an­noun­cing a one-year ex­ten­sion (BMF let­ter da­ted June 29, 2022).

This me­ans that the wi­th­hol­ding tax can be wai­ved for re­mu­nera­tion re­cei­ved be­fore July 1, 2023 if the fol­lo­wing con­di­ti­ons are met:

  • The pay­ment debtor is not do­mi­ci­led in Ger­many.
  • When the re­mu­nera­tion is re­cei­ved, the re­mu­nera­tion cre­di­tor is re­lie­ved of the bur­den of wi­th­hol­ding ta­xes le­vied in Ger­many by me­ans of a dou­ble ta­xa­tion agree­ment bet­ween Ger­many and its coun­try of re­si­dence.
  • The cre­di­tor of the re­mu­nera­tion shall sub­mit an ap­pli­ca­tion for ex­emp­tion from tax de­duc­tion to the BZSt by June 30, 2023, in which case the con­trac­tual re­la­ti­ons­hips - if ne­cessary in Ger­man trans­la­tion - shall be dis­clo­sed.
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