DT7907 - Double Taxation Relief Manual: Guidance by country: Germany, Federal Republic of: Notes

Business Profits (Article 7)

The protocol that entered into force in 2015 inserted a new Business Profits article. This new article was adopted by the OECD in 2010 and now appears in the OECD Model Tax Convention.

Pensions (Article 17)

Where a UK resident started to receive a pension from Germany before 30 December 2010, they may elect under Article 32(5) to continue to be taxed solely in the UK as though Article X of the 1964 Convention continued in force. Such an election is irrevocable.

Compensation and restitution payments (Article 17)

Payments made by the German government to a UK resident as compensation for political persecution or for an injury or damage sustained as a result of war (including restitution payments) or of a military or civil alternative service or of a crime, a vaccination or a similar event are taxable only in Germany.

Construction industry

With effect from 1 January 2002, Germany has in force measures to curb tax avoidance in the construction industry. Since that date, construction companies carrying on business in Germany are subject to a withholding tax of 15%, unless they are in possession of an exemption certificate. UK companies can apply for an exemption certificate, provided they do not have a permanent establishment in Germany. Broadly, their presence on a particular building site or project in Germany must not exceed 12 months.

To obtain an exemption certificate, the UK construction company should make an application to the relevant German tax office, which for companies resident in the UK is the Tax Office, Finanzamt Hanover-Nord. There are a number of requirements which must be fulfilled by the company if exemption is to be granted, including providing the German authorities with evidence from the UK tax authorities that the company is taxed in the UK. To do this, companies will ask for the certificate to be completed on the German questionnaire (StAb-Bau-Fragebogen (2002)). Since this merely asks for confirmation that the company is registered for tax purposes in the UK, there should normally be no reason why the certificate cannot be completed. The completed form should be returned to the company.

Note: The reference on the form to “income taxes” should be taken as covering both income tax and corporation tax. It is also possible that self-employed individuals may be subject to the withholding tax and thus in need of an exemption certificate. Any such request for certification may be dealt with as for a company.