DGAP-News

Haier Smart Home Co.,Ltd.: Announcement on D-share Dividend - Seite 2

As a general rule, the obligation to deduct investment income tax always applies to the domestic disbursing agent, unless the shareholders have submitted a non-assessment certificate (Nichtveranlagungs-Bescheinigung) or an exemption certificate (Freistellungsauftrag). Whether the dividend is actually taxable for the shareholder is irrelevant for the deduction of investment income tax. An exemption from tax deduction is therefore possible if, for example,

• the creditor of the investment income is an individual subject to unlimited tax liability who proves to the domestic disbursing agent by presenting the original of a valid non-assessment certificate that he is not expected to be assessed for income tax;
• the creditor of the investment income is an individual subject to unlimited tax liability who has issued a valid exemption certificate. An exemption certificate is the creditor’s private written instruction to the withholding agent not to deduct any investment income tax up to a tax-free maximum amount of EUR 801 (or EUR 1,602 in the case of spouses/life partners assessed jointly);
• the creditor of the investment income is a tax-exempt corporate body (Körperschaft) or a German legal entity under public law (juristische Person des öffentlichen Rechts);
• the investment income is part of the operating income earned by the creditor of the investment income, and the investment income tax payable by this creditor would, in the long term, be higher than the total income tax or corporate income tax (Körperschaftsteuer) to be assessed due to the nature of his transactions. This is to be proved by a certificate issued by the tax office responsible for the creditor;
• the creditor of the investment income is a corporate body, association of persons (Personenvereinigung) or estate (Vermögensmasse) subject to unlimited tax liability in Germany which serves tax-privileged purposes. This may apply to clubs (Vereine), for example. Proof of the preferred taxation must be furnished by means of a certificate issued by the tax office responsible for the creditor.

For the respective individual requirements, reference is made at this point to the regulations of German tax law (esp. section 43 para. 2, para. 3 in connection with section 44a of the German Income Tax Act (Einkommensteuergesetz – EStG). If it is not possible to refrain from the German investment income tax deduction, the withholding agent, i.e. the domestic disbursing agent, is to check whether the Chinese withholding tax levied in the amount of the withholding tax under the German-Chinese double taxation treaty can be credited directly against the investment income tax in the deduction procedure. This is only possible to the extent that the dividends are deemed to be income from capital assets, which is particularly the case with individuals holding shares as non-business assets (section 43a para. 3 sentence 1 of the German Income Tax Act; German Federal Ministry of Finance (BMF), 18 January 2016, Federal Tax Gazette (BStBl.) I 2016, p. 85, para. 202 in connection with the German Federal Ministry of Finance (BMF), 31 March 2022, Federal Tax Gazette (BStBl.) I 2022, p. 328, para. 3). According to the overview issued by the German Federal Tax Office (Bundeszentralamt für Steuern – BZSt) regarding the rates of creditable foreign withholding tax, the creditable Chinese withholding tax amounts to 10% if no exemption exists.¹ If the Chinese withholding tax is credited against the investment income tax by the disbursing agent, the investment income tax is only levied as a result at a rate reflecting the difference to a tax deduction of 25%. If the crediting of the withholding tax is not possible for the disbursing agent, a crediting of the foreign withholding tax cannot take place in the deduction procedure at the level of the disbursing agent. The shareholder may then achieve relief from taxation in the assessment procedure.