The German Ministry of Finance issued a circular on February 11 that provides updated filing and withholding procedures for royalties attributable to IP registered in a German book or register. By taking advantage of this new simplified process within the prescribed time limits, taxpayers have an opportunity to avoid penalties that may otherwise be imposed.
The updated procedures provide a simplified process for royalties received by taxpayers who are eligible for treaty benefits under the relevant German tax treaty. Pending meeting certain criteria and qualifications, taxpayers can apply for a retroactive withholding exemption certificate which will be effective for all open tax years. However, the circular provides a limited time period for taxpayers to take advantage of these simplified procedures.
As discussed in more detail below, the circular notes that no withholding tax (WHT) is applied to capital gains realized on dispositions of German-registered IP. Instead, taxpayers are instructed to file a German tax return with respect to such disposition, irrespective of whether the disposing taxpayer is eligible for treaty benefits under a treaty with Germany.