Personal eligibility

As controversially discussed in German professional tax literature in recent years, it shall now be sufficient if indirect shareholders also have ‘a claim’ for German WHT reduction instead of a ‘claim under the same legal provision’ compared to the applicant seeking German WHT relief. This means different legal basis claims (e.g., under a Double-Tax-Treaty and under the EU Parent-Subsidiary-Directive) are acceptable for relief eligibility, offering broader access to a potential German WHT relief. This should especially be the case, if the indirect shareholder has sufficient substance within the meaning of the German anti-treaty / anti-directive shopping rules but resides in a different territory or is eligible for a different yet equivalent relief than the company receiving the dividend.

Partial relief

When indirect shareholders have a lower relief eligibility compared to the applicant, the relief is now only partly restricted instead of being entirely denied. This adjustment mitigates the exclusionary impact of previous German WHT law interpretations.

If, e.g., an applicant is entitled to a reduction to 0% while the indirect shareholder would only be entitled to a reduction down to 5%, a reduction down to 5% may be granted to the applicant instead of falling back to ca. 26.4%.

Stock exemption clause

For the stock exemption clause, the applicant's state of residence shall no longer be decisive. Instead, it shall suffice if the publicly listed company holds an identical or higher relief claim compared to the applicant. This is expected to widen the scope for applying the stock exemption clause without residency constraints. This simplification shall only apply in cases where the ListCo owns 100% of shares (in)directly in the applicant or is the applicant itself. In case the shareholding is less, it remains a case-by-case analysis.

Updated questionnaire

Accordingly, the BZSt has also published an updated questionnaire to assess potential WHT relief claims (find the English version directly at the BZSt's website here).

These updates reflect a shift towards providing more inclusive and flexible relief from German withholding tax, simplifying the requirements for eligibility and addressing previous limitations in relief entitlement based on the identity of legal claims or residency.

While these practical simplifications should generally facilitate cash repatriation via regular dividend distributions from Germany, it should be noted that it is questionable whether the view expressed by the BZSt in its guidance has a legal basis given the legislative materials to the law.