Why are German-based shareholders not required to pay tax on the dividend?
Since the dividend is being paid in full from the tax reserve account as defined by section 27 of the KStG – German Corporation Tax Act – (contributions not paid into the nominal capital), the payment for shareholders resident in Germany is made without deduction of capital gains tax and solidarity surcharge. For tax purposes the distribution is considered a refund on investment and reduces acquisition costs. The dividend does not entitle recipients to a tax credit. For shareholders not resident in Germany the dividend is taxed according to the tax regulations of the corresponding country of residence.
