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Important note: Every effort has been made to communicate the information as accurately as possible, and all pertinent subclauses of tax laws are referenced where applicable. However, please make sure to read the date of publication of this blog post in order to ascertain when it is outdated.

Australia and Germany have entered into a new double taxation agreement (DTA). Both states have ratified the agreement signed already in 2015. The new DTA is effective in Germany since 7 December 2016. It replaces the DTA of 1972. Its rules will apply from 1 January 2017 on. The DTA is meant to strengthen trade and investment between both economies by providing greater taxation certainty. The DTA also applies the OECD/G20 Base Erosion and Profit Shifting (BEPS) principles to help countering tax avoidance measures of multinational companies.

Important note: There are four variants of the withholding tax currently in effect in the German taxation regime. These include withholding tax on construction, withholding tax on income of non-residents, final withholding tax, and withholding tax on income from capital. This article solely concerns itself with the withholding tax on income of non-residents. Every effort has been made to communicate the information as accurately as possible, all pertinent subclauses of tax laws are referenced where applicable. However, please make sure to read the date of publication of this blog post in order to ascertain when it is outdated.

Important note: There are four variants of the withholding tax currently in effect in the German taxation regime. These include withholding tax on construction, withholding tax on income of non-residents, final withholding tax, and withholding tax on income from capital. This article solely concerns itself with withholding tax on income from capital.

What is the tax payable on?

Income tax is imposed on the income of individuals and partners in a partnership. While worldwide income is subject to taxation in the case of unlimited tax liability (see the section entitled “Who pays the tax?” below), limited tax liability means that taxation is based solely on domestic-source income within the meaning of section 49 of the Income Tax Act.

What is the tax payable on?

Under the tax system, value added tax (VAT) is classified among the taxes on income, property and transactions (with the exception of import VAT). VAT operates in the same way as a general excise duty and is chargeable in principle on all public and private consumption (i.e., goods and services purchased by final consumers). In this respect, it differs from income tax and wages tax, which take into account the individual taxpayer’s ability to pay taxes.

What are the duties payable on?

Customs duties are levies imposed on imported goods in accordance with the Common Customs Tariff.Customs duties become payable not when dutiable goods are transported across the customs border but rather when they are released for free circulation (i.e., when they are imported in the commercial sense), which requires a declaration of release for free circulation.

What is the tax payable on?

Corporation tax is a special type of income tax for legal entities (in particular incorporated businesses such as the AG, GmbH or European Company), other organized groupings of persons (such as associations) provided they are not partnerships as defined in the Income Tax Act, and conglomerations of assets (such as foundations).