Taxes at the Source - The Pitfalls of Preventing Double Taxation

Expert Webinar with PricewaterhouseCoopers GmbH as part of the "International Tax Highlights" Event Series

As part of the jointly organized bi-annual event series “International Tax Highlights,” AmCham Germany hosted a virtual Expert Briefing in cooperation with Patron Member PricewaterhouseCoopers GmbH on April 27, 2022. To kick off the webinar entitled “Taxes at the Source - The Pitfalls of Preventing Double Taxation,” tax expert Christof Letzgus, Partner at PwC Germany in Frankfurt, welcomed virtually a diverse group of AmCham Germany members as well as other interested participants. Nils Niewiera, Manager at PwC Germany, contributed his insights on the subject matter.

Like most countries, Germany levies withholding taxes on certain domestic payments to foreign payment recipients under its limited tax liability regime. To limit double taxation, the German double tax treaties with the U.S. and around 90 other countries, as well as the relevant directives of the EU and the European Economic Area, provide for full or partial relief from the maximum permissible withholding tax.

While at the end of the last century the international rules were all about avoiding obstacles to cross-border investment and the free movement of capital, the focus now seems to be on combating actual or alleged abuses - in many cases also with a far-reaching reversal of the burden of proof at the expense of the taxpayer.

This is expressed, for example, in a tightening of national reservations (treaty overrides) and procedural hurdles for those wishing to claim double taxation relief. On the other hand, so-called minimum standards and reservations have been introduced in the regulations, or in some cases a restrictive interpretation is given by unwritten reservations.

This event had the aim to provide an overview of the overlapping national and international regulations and procedural requirements and specifically address the practically relevant adjusting screws. In particular, the legal changes from 2021 and the so far practical experiences in their application were highlighted, such as the tightened anti-shopping rule, the WHT relief process 2.0, and the relief for foreign WHT. In addition, further developments to be expected were addressed.

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Heather Liermann

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