Germany–U.S. · German Perspective
U.S. Dividends for German Residents
How are dividends from U.S. stocks taxed when the investor is resident or taxable in Germany? From the German perspective, the key issues are German taxation of the dividend, U.S. withholding tax, the treaty rate, Form W‑8BEN and the German foreign-tax credit.
German Taxation
Germany Taxes the Dividend Even Though the Source Is in the United States
An individual who is subject to unlimited German income taxation generally has to report and pay German tax on dividends from U.S. stocks as well. The location of the broker or the distributing company does not change that principle.
For private investments, dividends are generally subject to the separate German tax rate for investment income. The German income-tax rate is generally 25%, plus solidarity surcharge and, where applicable, church tax.
U.S. withholding tax is not simply added on top of the German tax burden. Instead, it is taken into account within the German foreign-tax-credit rules.
Framework
Three Levels Must Be Coordinated
U.S. Withholding Tax
The United States generally imposes withholding tax on U.S.-source dividends; the treaty can limit the rate.
German Income Tax
Germany taxes the dividend under German law when the investor is resident and taxable in Germany.
Foreign-Tax Credit
Allowable U.S. withholding tax is credited against German tax within the applicable German limitations.
Article 10 Germany–U.S. Tax Treaty
Portfolio Dividends: U.S. Withholding Tax Is Generally Limited to 15%
For an individual resident in Germany holding a typical portfolio investment, the Germany–U.S. tax treaty generally limits U.S. withholding tax to 15% of the gross dividend.
Different rates can apply to certain qualifying corporate shareholdings. Those cases should be distinguished from an ordinary private portfolio investment.
- typical portfolio dividend: maximum 15% U.S. withholding tax
- treaty entitlement must actually exist
- beneficial-owner status is relevant
- certain corporate holdings can be subject to different rules
- without valid treaty documentation, a higher U.S. withholding rate may apply
- German taxation still applies in addition
Treaty Relief at Source
Form W‑8BEN Documents Treaty Status to the U.S. Withholding Agent
An individual resident in Germany who is not a U.S. person can use Form W‑8BEN to document foreign status and treaty eligibility to a U.S. broker or other withholding agent.
If the form is valid and the treaty conditions are met, the reduced treaty rate can generally be applied directly when withholding tax is deducted.
U.S. citizens, green-card holders and other U.S. persons generally do not use Form W‑8BEN for their own U.S. tax status.
Section 32d(5) EStG
Germany Credits Foreign Withholding Tax Only Within Defined Limits
Foreign Tax Paid
Foreign tax is generally creditable if it was imposed and paid on the foreign investment income and corresponds to German income tax.
Reduce for Refund Claims
If the treaty gives the taxpayer a right to a reduction or refund, the creditable foreign tax is reduced by that refundable amount.
Limited to German Tax
The credit is limited to the German tax attributable to the relevant foreign investment income.
No Double Benefit
An amount recoverable in the source country generally cannot simultaneously be treated as final foreign tax fully creditable in Germany.
Example
USD 1,000 U.S. Dividend for a German Resident
For a typical portfolio investment, the Germany–U.S. treaty can limit U.S. withholding tax to 15%. On a gross dividend of USD 1,000, that would mean USD 150 of U.S. withholding tax.
Germany taxes the gross dividend under German law. The allowable U.S. withholding tax is then credited within the German statutory limits.
For the German tax return, both the gross dividend and the withholding tax have to be converted into euros.
U.S. Person Resident in Germany
For U.S. Citizens, U.S. Taxation Continues in Parallel
A U.S. citizen or other U.S. taxpayer resident in Germany generally remains subject to U.S. taxation on worldwide income. U.S. dividends therefore also remain reportable on the U.S. tax return.
The treaty contains special coordination rules intended to prevent double taxation in such cases. German taxation and the U.S. foreign-tax-credit system therefore have to be coordinated carefully.
- German taxation as country of residence
- continued U.S. taxation because of U.S. taxpayer status
- special treaty coordination for U.S. citizens
- U.S. foreign tax credit analyzed separately
- W‑8BEN is generally not the correct form for U.S. persons
Related Guidance
Related Topics
Frequently Asked Questions
U.S. Dividends for German Residents
What is the U.S. withholding-tax rate on dividends for a German resident?
Are U.S. dividends taxed again in Germany?
What is Form W‑8BEN used for?
Can I fully credit 30% U.S. withholding tax in Germany?
What if the dividends are held through a U.S. broker?
What applies to U.S. citizens living in Germany?
Germany–U.S. Tax Advice
Receiving U.S. Dividends While Resident in Germany?
We review U.S. withholding tax, W‑8BEN and treaty relief, German taxation and foreign-tax credits, and for U.S. persons the coordination with the U.S. tax return.
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