Do dividends have to be taxed?
Who doesn't enjoy high dividends? Unfortunately, that joy is tarnished a little. In Germany they have to be taxed. The payment of the final withholding tax cannot be avoided.
Dividends have to be taxed in Germany
Basically, you should know that dividends are company profits that are distributed to shareholders once a year, if so decided by the board of directors.
- Do you have shares from a company that makes a profit in its annual financial statements, the company and, under certain circumstances, you too will benefit. This profit is paid out to you on a pro rata basis. However, this is only the case if the company's board of directors does not decide to reinvest. The choice of whether the money will flow back into the company or to the shareholders rests with the board of directors.
- That Tax office counts dividends as income from investment income. This income is subject to flat-rate taxation, so it must be taxed. The final withholding tax must be paid.
Interesting facts about the final withholding tax
All income, including dividends, is subject to the withholding tax and must be taxed. If you have received a dividend, you must state this in your tax return. You are taxed as a private individual and not at company level. This is because the payouts are subject to post-tax.
- The company paid the tax on the profits prior to the corporate income tax payout. As a private person, you have nothing to do with this.
- The amount of the final withholding tax is the same in every tax class because it is a lump sum. The flat rate tax rate is currently 25%.
- Please note that in addition to the final withholding tax, the solidarity surcharge of 5.5% must be paid. If you are in church, you still have to pay church tax.
Until 2009, taxation on share profits was only due if between purchase ...
In total, if you have to pay church tax, the total charge for all taxes payable on the dividend is 28%. If you are not in church, the total exposure is 26.38%. (As of May 2014)
