Doppelbesteuerung

What Is Doppelbesteuerung?

Doppelbesteuerung, or Doppelbesteuerung, refers to the levying of two or more taxes by different tax authorities on the same income, asset, or financial transaction. This phenomenon primarily arises in two contexts: economic double taxation and international double taxation. Economic double taxation typically occurs when corporate profits are taxed at the company level via Körperschaftsteuer and then again when those after-tax profits are distributed to shareholders as Dividend income, which is subject to Einkommensteuer or Kapitalertragssteuer in the hands of the individual. International double taxation, a key aspect within Steuerrecht, happens when the same income is taxed in two different countries due to conflicting tax rules regarding source or residency.

History and Origin

The concept of double taxation, particularly in its international dimension, became increasingly prominent with the rise of global trade and investment in the late 19th and early 20th centuries. As businesses expanded beyond national borders, the potential for being taxed in both the country where income was earned (source country) and the country where the company or individual was resident (residence country) became a significant impediment to international commerce. Early attempts to address these issues were fragmented, but the need for a more systematic approach led to the development of bilateral Steuerabkommen. The League of Nations (a precursor to the United Nations) began drafting model tax conventions in the 1920s to provide a framework for these treaties. This foundational work was later continued and significantly expanded by the Organisation for Economic Co-operation and Development (OECD) with its Model Tax Convention on Income and on Capital, first published in 1963. Today, the OECD Model Tax Convention serves as a benchmark for over 3,000 global tax treaties, aiming to reduce tax barriers and prevent tax avoidance. ⁵Many tax treaties broadly define what constitutes a tax, and generally identify the specific taxes covered.

Key Takeaways

• Doppelbesteuerung occurs when the same income, asset, or transaction is taxed more than once by different tax authorities.
• It can be economic (e.g., corporate profits and then shareholder dividends) or international (e.g., income taxed in two countries).
• Tax treaties (Doppelbesteuerungsabkommen - DTAs) are the primary mechanism countries use to alleviate international double taxation.
• Mechanisms like tax credits, tax exemptions, and reduced withholding rates are employed within treaties to prevent or mitigate its effects.
• Doppelbesteuerung can distort investment decisions, reduce economic efficiency, and hinder cross-border trade and investment.

Interpreting the Doppelbesteuerung

Understanding doppelbesteuerung involves recognizing the various scenarios in which it can arise and the mechanisms in place to mitigate its impact. In a domestic context, it primarily impacts corporate structures, where Unternehmensgewinne are taxed before Gewinnverteilung to shareholders, who then face another layer of tax on their dividends. This can influence decisions on corporate financing (debt vs. equity) and the choice of business entity.

In an international context, interpreting doppelbesteuerung means identifying whether a taxpayer's income falls under the taxing jurisdiction of two or more countries. This often depends on the taxpayer's Steuerliche Ansässigkeit and the source of the income. For example, a German resident earning income from a business in the United States could face taxation in both Germany and the U.S. Effective tax planning and reliance on bilateral tax treaties are crucial to navigate these complexities and avoid excessive tax burdens.

Hypothetical Example

Consider an individual, Anna, who is a resident of Germany but owns shares in a publicly traded U.S. Aktiengesellschaft. In a given year, the U.S. company earns a profit and pays corporate income tax in the United States. Subsequently, it distributes a Dividend to its shareholders, including Anna.

1. Corporate Level Taxation (U.S.): The U.S. company's profits are subject to U.S. Körperschaftsteuer.
2. Dividend Withholding (U.S.): When the dividend is paid to Anna, the U.S. may impose a Quellensteuer (withholding tax) on the dividend income before it reaches her, as it is U.S.-sourced income.
3. Individual Level Taxation (Germany): Anna, as a German resident, must declare this dividend income on her German income tax return, where it is subject to German Kapitalertragssteuer.

Without a tax treaty between Germany and the U.S., Anna would effectively be taxed on the corporate profits (indirectly through the company's tax burden), then directly by the U.S. withholding tax, and finally by German income tax on the same dividend amount. The existing tax treaty between Germany and the United States, however, provides mechanisms to relieve this, typically by allowing Germany to provide a tax credit for the U.S. withholding tax paid.

Practical Applications

Doppelbesteuerung has significant practical implications across various financial activities, driving the need for sophisticated tax planning and international agreements.

• International Investment: For multinational corporations and individual investors, understanding and mitigating international doppelbesteuerung is critical for determining the profitability of cross-border investments. Tax treaties between countries, such as those signed by the United States with numerous foreign countries, aim to alleviate this by specifying how different types of income are taxed and which country has primary taxing rights or must provide relief. Fo⁴r instance, the recent double taxation agreement between the UAE and South Korea, signed in October 2023, exemplifies ongoing efforts to facilitate trade and investment by preventing income from being taxed twice.
• ², ³ Corporate Structure: Companies often consider the implications of doppelbesteuerung when choosing their legal structure, especially for Holdinggesellschaft arrangements, to optimize the flow of profits and dividends.
• Tax Treaties: Bilateral Steuerabkommen, also known as Double Taxation Agreements (DTAs), are the cornerstone of combating international doppelbesteuerung. These treaties define taxing rights, establish methods for relief (like tax credits or exemptions), and provide mechanisms for information exchange and dispute resolution between tax authorities. The OECD Model Tax Convention is a widely adopted basis for these treaties.
• ¹ Expatriate Taxation: Individuals living and working abroad must navigate complex Internationale Besteuerung rules to ensure their global income is not subject to double taxation in their home and host countries.

Limitations and Criticisms

While mechanisms like tax treaties aim to alleviate doppelbesteuerung, the concept and its relief measures are not without limitations and criticisms.

One major criticism, particularly concerning economic doppelbesteuerung of corporate profits and dividends, is that it can disincentivize equity financing and encourage debt financing, as interest payments are typically tax-deductible for corporations, while dividends are not. This can distort capital allocation decisions and potentially lead to less efficient Investitionsstandort. Critics argue that this form of double taxation unfairly burdens corporations and their shareholders, potentially reducing investment and economic growth. Some economists advocate for the repeal of the corporate income tax, partly due to concerns about its double taxation effects.

Furthermore, even with tax treaties, complexities can arise. Differences in legal interpretation between countries, the evolving nature of digital economies, and issues related to Gewerbesteuer or capital gains can lead to residual double taxation or create loopholes for aggressive tax planning. The process of claiming treaty benefits can be complex and burdensome for taxpayers, requiring detailed documentation and adherence to specific procedures.

Doppelbesteuerung vs. Steuervermeidung

While both "Doppelbesteuerung" (double taxation) and "Steuervermeidung" (tax avoidance) relate to the realm of taxation, they represent fundamentally different concepts.

Doppelbesteuerung describes a situation where the same income or asset is taxed twice. This can be an inherent design feature of a tax system (e.g., corporate profits and then dividends to shareholders) or an unintended consequence of conflicting tax laws between jurisdictions (international double taxation). It is a burden that taxpayers typically seek to relieve through legitimate means, such as tax treaties or domestic tax credits.

In contrast, Steuervermeidung refers to the legal practice of minimizing one's tax liability by utilizing provisions within the tax code, deductions, exemptions, or structuring financial affairs in a tax-efficient manner. This involves strategic planning to reduce taxes payable, but it operates strictly within the confines of the law. Steuervermeidung differs from "Steuerhinterziehung" (tax evasion), which is the illegal act of misrepresenting or concealing income or assets to avoid paying taxes. The confusion between doppelbesteuerung and steuervermeidung often arises because both involve optimizing tax outcomes, but one addresses an existing double burden, while the other aims to legally reduce an overall tax obligation.

FAQs

What are the main types of doppelbesteuerung?

The main types are economic doppelbesteuerung, where the same income is taxed at both the corporate and shareholder levels, and international doppelbesteuerung, where the same income is taxed in two different countries.

How do countries prevent international doppelbesteuerung?

Countries primarily prevent international doppelbesteuerung through bilateral Steuerabkommen. These treaties contain rules for allocating taxing rights and mechanisms for relief, such as granting a tax credit for taxes paid in the other country or exempting certain income from taxation.

Does doppelbesteuerung apply only to corporations?

No. While it is very prominent with corporate profits and dividends, doppelbesteuerung can also affect individuals, especially those with international income streams, and other forms of assets or transactions. For example, an individual might face double taxation on rental income from an overseas property or on inherited assets.

Is doppelbesteuerung always bad?

From an economic efficiency standpoint, doppelbesteuerung can lead to distortions in investment decisions and reduce the overall attractiveness of certain economic activities. However, the decision to implement certain forms of double taxation, such as the taxation of corporate profits and then dividends, is a policy choice that governments make based on revenue needs and fairness considerations. Tax treaties are generally seen as beneficial as they reduce barriers to international trade and investment.

How does a tax credit work in mitigating doppelbesteuerung?

A tax credit allows a taxpayer to reduce their tax liability in one country by the amount of tax already paid on the same income in another country. For example, if you earn income abroad and pay Quellensteuer there, your home country might allow you to claim a credit for that foreign tax against your domestic tax bill, preventing you from paying tax twice on the same income.