The Annual General Meeting of Shareholders on May 9, 2018, under item 2 of the agenda (Appropriation of balance sheet profits for financial year 2017) resolved the distribution of a cash dividend in an amount of €0.30 per share entitled to dividend payment for financial year 2017.
What Are the Procedures for Dividend Taxation and Payment for a Domestic Shareholder?
Dividend payments to a domestic shareholder are subject to a withholding tax on income from capital investments with a standard rate of 25 percent ("flat rate withholding tax") plus Solidarity Surcharge and Church Tax, if applicable. The flat rate withholding tax is charged independently of the personal effective tax rate and discharges from all further related tax liabilities. For shareholders with a personal effective tax rate lower than 25 percent it is possible to declare the dividend income in the personal tax return and to obtain a refund of the difference between the personal effective tax rate and the flat rate withholding tax paid. For shareholders who have provided their depository banks with a certificate of non-assessment, the tax deduction is not applicable. The same applies for shareholders who have provided their depository banks with an exemption order, to the extent that the exemption amount has not already been used up by other income from capital investments.
Tax-Free Allowances and Tax Deductible Amounts for Private Investors
A general deductible allowance for income from capital investments in the amount of EUR 801 (EUR 1,602 for married couples filing jointly) will be considered in the income calculation. A deduction of actual costs related to this income from capital investments is not allowed.
Withholding Tax on income from capital investments, German Solidarity Surcharge and Church Tax
If the shareholder has not provided his depository bank with an exemption order or a certificate of non-assessment, the depository bank is required to withhold a tax of 25 percent (tax rate of the flat rate withholding tax) plus Solidarity Surcharge of 5.5 percent on the withholding tax (a total of 26.38 percent) and to transmit this amount to the German Tax Office. If a shareholder is subject to Church Tax, the depository bank will additionally automatically withhold and transmit the Church Tax to the tax-gathering religious community. In this case, the tax burden for flat rate withholding tax including Solidarity Surcharge and Church Tax amounts to approx. 28 percent. No automatic deduction of Church Tax is made if the shareholder raised a written and timely objection against the data retrieval of the religious confession (so called Sperrvermerk) to the Federal Central Tax Office. In this case the shareholder has to declare the dividend payment in his income tax return. Thus the Church Tax deduction is carried out as part of the shareholder’s income tax assessment.
What Are the Procedures for Dividend Taxation and Payment for a Foreign Shareholder?
A foreign shareholder (an investor without a permanent domicile or primary residence in Germany) is subject to limited tax liability in Germany if, for example, they earn income from capital investments in Germany. This includes dividends from German joint stock companies.
The taxation of German-sourced dividends is subject to the applicable tax regulations in the shareholder’s country of residence.
Taxation in Germany
Foreign shareholders who own their shares as private assets are not liable for taxes in Germany beyond the withholding tax on income from capital investments (and the additional Solidarity Surcharge) withheld by the depository bank .The shareholder may not deduct related expenses.
The depository bank makes the dividend payment to the foreign investor deducts the withholding tax on income from capital investments of 25 percent and the additional 5.5 percent Solidarity Surcharge (a total of 26.38 percent) required under German law. Furthermore, the shareholder receives a tax certificate detailing the withholding tax and Solidarity Surcharge for personal income tax return purposes.
Reduced Withholding Tax on income from capital investments
A reduced withholding tax can be applied to dividend payments to a foreign shareholder if this is foreseen in the double-tax treaty between Germany and the shareholder’s country of residence. The reduction is applied by calculating the difference between the German withholding tax liability (including the Solidarity Surcharge) and the tax liability according to the tax rates under the applicable double tax treaty. A tax credit application is then filed with the Federal Central Tax Office for a refund of this amount. Tax credit request application forms are available from the Federal Central Tax Office (Bundeszentralamt für Steuern, An der Küppe 1, 53225 Bonn, Germany or the German website http://www.bzst.bund.de) and at German embassies and consulates. The tax credit request application must be submitted to the Federal Central Tax Office by the end of the fourth year following the year of dividend payment.
E.ON Recommends Individual Tax Advice
The explanations above are not necessarily comprehensive due to the numerous potential circumstances in individual cases. Shareholders should not hesitate to obtain individual tax advice which can better take into account individual situations.