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German Bundestag Adopts Multiple DTAs

by Ulrika Lomas,, Brussels

31 October 2012

On the recommendation of the finance committee, the German Bundestag, or lower house of parliament, recently adopted the government’s bill pertaining to double taxation agreements (DTAs) concluded with Luxembourg, the Netherlands and Liechtenstein.

The bilateral DTA with Luxembourg, dating from April 23, 2012, provides for a reduction in the withholding tax rate levied on dividends from 10% to 5% and for a reduction in the minimum participation from 25% to 10%.

The agreement accords a right to tax social insurance and state-funded pensions to the source state and contains a provision providing for a comprehensive exchange of information to curb “harmful tax competition”.

According to the German finance ministry, the new agreement on the avoidance of double taxation in the area of taxes on income, which is a comprehensive revision of the old existing bilateral accord between Germany and Luxembourg, corresponds both in structure and content to the Organization for Economic Cooperation and Development’s Model Convention, as well as to the German and Luxembourg principles on DTA policy.

The new treaty, which aims to promote and to deepen economic relations between the two countries, retains both the zero rate applied to interest and the 5% rate of withholding tax applicable to royalties.

The new agreement is due to replace the existing DTA, dating from 1958, following completion of the ratification process.

Dating from April 12, 2012, the DTA with the Netherlands lowers the withholding tax rate imposed on dividends to 5%. In addition to the right to tax state pensions, the source state is also accorded the right to tax annual pensions in excess of EUR15,000 (USD19,350).

The provision on the exchange of information encompasses not only banking information but also other information, as part of efforts to combat money laundering, corruption and the financing of terrorism.

The DTA with Liechtenstein, dating from November 17, 2011, provides for the waiver of a withholding tax imposed on dividend payments with a minimum participation of 10% and with a minimum participation period of one year. The DTA also accords a withholding tax right for gains from the personal rights of artists and sportsmen. An information exchange provision allows for the automatic exchange of tax information.

TAGS: tax | artists | pensions | double tax agreement (DTA) | Netherlands | interest | royalties | banking | Organisation for Economic Co-operation and Development (OECD) | Luxembourg | agreements | sportsmen | withholding tax | Germany | dividends

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