How to reclaim or avoid withholding tax in Germany

German withholding tax explained

The German withholding tax is called Quellensteuer. This literally means "withholding tax." The most common form is Kapitalertragsteuer, or dividend tax. Germany also levies a withholding tax on license fees and royalties (Abzugsteuer). This withholding tax means you lose income.

Depending on the type of compensation, the withholding tax rate in Germany is:

Even though the Netherlands and Germany have a tax treaty to prevent double taxation, you are not automatically entitled to a tax credit. However, you can reclaim the tax retroactively (up to four years back) or apply for an exemption in advance.

Claiming back withholding tax in Germany: step-by-step plan

Want to reclaim German withholding tax? Follow these steps:

1. Gather documents proving how much tax was withheld in Germany. This is important for your refund request.
2. Submit the refund request to the German tax authorities. This can be done via an official form (Antrag auf Erstattung der deutschen Steuer).
3. The German tax authorities (Bundeszentralamt für Steuern; BZSt) usually process your request within a few months. Unfortunately, in complex cases, it can take one to two years. However, if the documents are submitted completely and correctly from the outset, this usually leads to fewer questions from the German tax authorities, thus speeding up the process.

You can also have Heisterborg International handle your refund request. We'll perform a quick initial check to determine your eligibility, submit all documents and supporting evidence, and handle all contact with the BZSt (Belgian Tax Authority). This can be beneficial even for one-time income in Germany.

Avoid double taxation: apply for an exemption

You can also prevent withholding tax from being withheld. You can do this by applying for a Freistellungsbescheinigung (tax return) in time. This means the German taxpayer doesn't have to withhold anything. This is faster and prevents hassle later.

Common mistakes – and how we avoid them

Despite good intentions, things often go wrong in practice. Below are some of the most common mistakes that lead to high costs or long delays:

1. Applying too late

It often happens that refund requests are submitted too late , forfeiting the right to a refund . This is a missed opportunity that could easily have been avoided with a timely and well-prepared application.

2. Pay out first, think later

Many companies decide to distribute profits without first applying for an exemption certificate. The result: the distribution must be postponed, sometimes for months or even years, until the certificate is received, or it can only be distributed net.

3. Underestimating the procedure

The BZSt regularly asks additional questions, often in multiple rounds. This frustrates clients who submit applications independently and sometimes abandons the process.

4. Incomplete or poorly prepared applications

If an application is incomplete or insufficiently substantiated, long waiting times and repeated correspondence will follow. This significantly delays the process and increases the risk of rejection.

We have years of experience handling complex applications at the BZSt. This means we know exactly what works. We can help with things like:

• Dutch holding companies and STAK structures.
• Natural persons as shareholders.
• Listed companies.
• Active and passive companies.
• Entrepreneurs who want to receive tax-free dividends.

We:

• Substantiate your activity so that you do not get stuck with the anti-abuse rules.
• Knowing how to deal with a STAK or holding structure.
• Advising on the best structure choice for future dividends.
• Keep the process simple, even if you have multiple shareholders.

How does it work?

1. Free initial check: you will know within two working days what is possible.
2. Full support: we handle the application and arrange everything with the BZSt.
3. Costs negotiable: we're happy to discuss these after analyzing your situation. This way, we maintain transparency from the outset.