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German Treaty Favors S Corporations

In its decision on June 26, 2013, the German Federal Fiscal Court (“the Court”), cited I R 48/12, IStR 2013, p.880, overruled a lower court case and found in favor of the taxpayer. Using logic similar to Canada Revenue Agency’s established position that an S corporation is a U.S. resident corporation that has elected not to be subject to tax, the Court concluded that an S corporation holding at least 10 percent interest in a German GmbH suffers withholding on dividends from the GmbH at a rate not to exceed 5 percent. Were the treaty not to apply, the rate. Read More.

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