A Guide on Dividends in Germany

The dividends of German companies are mostly issued in stocks but they can be issued as well as cash payments or other types of properties. The dividend represents one part of the earnings of the company and equals usually an amount proportional to the growth of the stocks of the company. If you are new to the stocks market in Germany and you need legal instructions regarding dividends revenues in this country, you are most welcome to discuss your plans and questions with our German lawyers.

How to employ the dividends in Germany

If you open a company in Germany you might intend to develop a dividend strategy in order to attract investors. The reason for which investors are interested in the dividends policy of the company in which they intend to invest is that the payment of dividends has increased liquidity by comparison with the capital gains. Also, many investors choose to receive income from dividends because of the favorable taxation rates set for this type of revenue.  

A German company has usually the right to employ its own strategy and to take its own decisions regarding the amount that is going to be distributed to shareholders through dividends. The policy of the companies is something that investors need to know and analyze before investing in them. This is why it is recommendable for investors to employ a due diligence service or personalized legal support from a German law firm that can help you make a more informed decision on your investment. 

Legal provisions regarding taxation of dividends in Germany

According to the tax system of this country, the individual German residents, support the withholding tax applied to dividends at the rate of 25% to which is added the solidarity surcharge of 5.5%. If you have the management place for your company in Germany, then you are considered to have a tax residency in this country and you will be charged 60% of the dividends at the individual rate. Our lawyers in Germany can help you identify the category in which you enter and to calculate exactly the due taxation percentage. 

One of the main laws which regulate dividend taxation in Germany is the Corporation Tax Act. It provides a non-discriminatory policy for foreign investment. The double tax agreements grant a 40% refund to foreign corporations that fall under the provisions of a double taxation treaty between Germany and another state. In order to benefit from the refund, the company should apply for it to the Federal Central Tax Office.

You are welcome to contact our law firm in Germany anytime you need more information on dividend taxation in Germany in order to understand and use efficiently the legal implications of the stock market in this country.