Top German Court Backs Tax Treaty Relief for US Hybrid Entity

An American S corporation receiving dividends from its wholly owned German subsidiary is entitled to a full exemption from German withholding tax, but its shareholders must claim the refund, a top court ruled.

The March 11 ruling from Germany’s Federal Fiscal Court, released Thursday, rejects the German tax authority’s attempt to use a 2013 withholding tax rule amendment to block full tax relief for a US corporate structure in which income is only taxed in the hands of shareholders.

The ruling doesn’t disclose the names of the private parties or the amount of the dividend involved, as per ...