Payment of dividend to German share holder

Payment of dividend to German share holder

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My client is a private English company whose only shareholder is a German National. The company has made substantial profit. The share holder now wishes to extract the profit by way of dividend. 

Can this be done without any tax implication.

Replies (9)

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By frustratedwithhmrc
10th Jul 2013 06:17

Need more information...

Where is the German citizen resident for tax purposes? UK, Germany, both (i.e. dual) or somewhere else entirely?

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Replying to Mr Trellis of N Wales:
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By Chandrakant Patel
11th Jul 2013 00:37

German Citizen reside in Germany for tax purpose

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By johngroganjga
10th Jul 2013 07:55

If you are asking about the tax implications for the UK company paying the dividend, there aren't any.

If you are asking about the tax implications for the German recipient of the dividend the further information requested by @frustratedwithhmrc will be required.

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By johngroganjga
11th Jul 2013 07:51

Thank.  And whose tax

Thank you.  And whose tax implications are you asking about?  The UK company?  The German shareholder? Both?

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By paras007
11th Jul 2013 10:44

More complicated

Presuming that the only shareholder is also the only director, it would appear that effective control of the company is in Germany... which would likely have German corporation tax implications.

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Replying to Chris7:
By johngroganjga
11th Jul 2013 10:59

Good point

paras007 wrote:

Presuming that the only shareholder is also the only director, it would appear that effective control of the company is in Germany... which would likely have German corporation tax implications.

But wouldn't the identity of the directors, and the location where they exercise their functions, not trump the residence of the 100% shareholder, if different?

 

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Replying to Chris7:
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By frustratedwithhmrc
11th Jul 2013 11:05

Yes, have to agree here

paras007 wrote:
Presuming that the only shareholder is also the only director, it would appear that effective control of the company is in Germany... which would likely have German corporation tax implications.

Relevant sections are 7-14 AStG, Foreign Tax Act shown below (in German)

http://www.gesetze-im-internet.de/bundesrecht/astg/gesamt.pdf

Basically, a UK company in the control of a German resident would be deemed resident  in Germany and therefore subject to German corporate and social taxes.

English praece here:

http://en.wikipedia.org/wiki/Controlled_foreign_corporation#German_rules

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By Chandrakant Patel
12th Jul 2013 11:08

Let me make it it more complicated. There are two directors. Father & son. Father is the shareholder director, Who is German national & reside in Germany. Son is also German national but reside In UK. and manage the company from UK.

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By frustratedwithhmrc
12th Jul 2013 11:39

Doesn't really help much...

I suspect the German taxman would argue that the father is still controlling the company from Germany and that the son is just a proxy. It would be up to the father & son to prove they weren't and as we know it is hard to prove a negative.

The difficulty with all of this is the risk involved, you might run through the entire life of the contract without any problems and then 3 or 4 years down the line the German taxman comes knocking...

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