September 2014
Israel and Germany signed a new tax treaty, in Berlin, on 21 August 2014 that will replace the Israel - Germany Income Tax Treaty of 1962. The new Israel and Germany tax treaty generally follows the OECD Model. The new Israel and Germany tax treaty provides lower withholding tax rates.
One of the main changes in the new Israel and Germany tax treaty is the exchange of information between the two countries’ tax authorities. According to Article 25 of the Israel and Germany tax treaty, the Israel Tax Authority is authorized to require from banks and any other financial institution information about German citizens, and to deliver this information to the German authorities. On the other side, the German Tax Authority may demand from banks in Germany information about Israeli citizens who hold accounts and transfer that information to the Israel Tax Authority. It is therefore strongly recommended to consider applying under the Israeli New Voluntary Disclosure Program.
Withholding Tax
The withholding tax rates in the new Israel and Germany tax treaty are:
Dividends: a maximum withholding tax rate of 10% in general, and 5% if the beneficial owner is a company which holds directly at least 10% of the capital of the company paying the dividends;
Interest: a maximum withholding tax rate of 5% subject to exceptions;
Royalties: a maximum withholding tax 0%.
Capital Gains
According to Article 13 of the Israel and Germany tax treaty, a state may tax a former resident that has become a resident of the other state with respect to accrued capital gains attributable to the property of that person at the time of change of residence.
Dr. Avi Nov Law Offices, Israeli & international tax law
*This article is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion
