🇺🇸 United States — 🇩🇪 Germany

Tax Treaty / Double Tax Avoidance Agreement detail

The US-Germany Income Tax Treaty was signed on 29 August 1989 and entered into force on 21 August 1991, with a protocol amending certain provisions thereafter. Germany is the United States' largest European trading partner, making this treaty critical for multinational operations. Dividend withholding is reduced to 5% for corporate shareholders owning at least 10% of the paying company's voting stock and 15% for portfolio dividends. Dividends paid to pension funds may qualify for full exemption. Interest income is exempt from withholding entirely, as are royalties—an outcome more favourable than the OECD Model default of 10% on royalties. The treaty includes a Limitation on Benefits article to restrict access to third-country residents who structure through Germany or the US solely for treaty benefits. Qualified persons include publicly traded companies on recognised stock exchanges, pension plans, tax-exempt organisations, and individuals. Germany's trade tax (Gewerbesteuer) is not covered by the treaty; relief from this municipal tax depends solely on domestic German law. The treaty similarly does not affect the US branch profits tax or the alternative minimum tax in most circumstances. The saving clause allows the US to tax its citizens and green-card holders under domestic rules regardless of treaty provisions. Germany taxes its residents on worldwide income. The tie-breaking residency cascade follows the OECD model: permanent home, vital interests, habitual abode, nationality, then mutual agreement. A separate Totalization Agreement co-ordinates social security obligations and prevents dual contributions for workers moving between the two countries.