New BZSt Guideline: Relief from German Withholding Tax Made Easier – What Companies Need to Know

On March 17, 2025, the German Federal Central Tax Office (BZSt) published a new guideline on eligibility for relief from German withholding tax on capital income. This update brings more clarity and practicality for international investors—especially those dealing with cross-border capital investments or holding structures. But what does this mean in simple terms?

Background: Why is relief even necessary?

Capital income flowing from Germany to foreign recipients—such as dividends—is generally subject to German withholding tax. However, foreign investors may be eligible for partial or full relief under certain conditions. The aim is to avoid double taxation. At the same time, the law seeks to prevent tax abuse through so-called "treaty shopping" structures—where foreign companies with little substance are interposed just to claim tax benefits.

What’s new?

The guideline refers to Section 50d (3) of the German Income Tax Act (EStG) and introduces two key simplifications:

1. Personal eligibility for relief:

Previously, applicants had to prove that their shareholders were eligible for relief under the same legal basis. That strict interpretation is no longer applied. Now it’s sufficient that shareholders are in principle eligible for relief, regardless of the specific legal basis. Any limitation will now only apply to the extent of the relief, not the entitlement itself.

2. Stock exchange clause expanded:

For publicly traded companies, the rules have also been relaxed. The so-called “stock exchange clause” previously only applied at the direct ownership level. Now it can also apply to indirect ownership, as long as all intermediary companies are equally or more eligible for relief than the applicant. This is particularly relevant for multinational group structures.

Practical implications

The changes mean one thing above all: more legal certainty and easier applications. International investors and corporate groups with German holdings will benefit from lower administrative hurdles and more practical anti-abuse safeguards.

Still, companies must be able to provide documentation showing a genuine business presence and that the primary purpose of their structure is not tax avoidance. Furthermore, it should be noted that the new guideline only refers to exemption from capital gains tax and not to other withholding taxes in the case of interest or license payments

Conclusion

The new BZSt guideline is a welcome development in international tax practice. It enhances transparency, reduces red tape, and maintains a balanced approach to tax avoidance. For many multinational enterprises, this is a clear step forward.