Double taxation agreement

A double taxation agreement (Doppelbesteuerungsabkommen, DBA) prevents cross-border income from being fully taxed in two countries.

Why this matters for investors:

If you hold US shares and receive dividends:

• Without an agreement: the USA withholds 30% withholding tax. In Germany you pay another 26.375%. Taxed twice!
• With an agreement: the USA only withholds 15%. The 15% is credited against your German tax.

Sample calculation (€1,000 US dividend):

• US withholding tax (DBA): 15% = €150
• German flat-rate withholding tax: 26.375% of €1,000 = €263.75
• Credit: 15% of €1,000 = €150
• Remaining German tax: 263.75 − 150 = €113.75
• Total burden: 150 + 113.75 = €263.75 (exactly as with a purely German dividend!)

Important treaty countries and withholding tax rates:

• USA: 15% (with the W-8BEN form, otherwise 30%!)
• Switzerland: 35% (but only 15% creditable, the rest reclaimable on application)
• France: 12.8%
• Netherlands: 15%
• UK: 0% (no withholding tax on dividends!)

Practical tips:

• Your German broker usually handles the treaty credit automatically (withholding tax reduced at source)
• For Swiss shares: reclaim 20% of the withholding tax on application (takes 2–3 years)
• Fill in the W-8BEN form for US shares – otherwise your broker pays 30% instead of 15%