Bundeszentralamt für Steuern

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Summary of Tax Withholding and Relief Procedure

Summary of Tax Withholding and Relief Procedure

Learn the basics of the procedures for withholding tax under Section 50a Income Tax Act (EStG) and obtaining relief from withholding tax under Section 50d EStG.

Withholding method

Domestic income earned by foreign artists, athletes, license grantors and directors within the meaning of Section 49 Income Tax Act (EStG) is subject to limited tax liability. This income is taxed using a special procedure, the tax withholding procedure defined in Section 50a EStG.

In this procedure, the (generally domestic) payers of this income are required to withhold taxes from the payments to the foreign payees and then pay these taxes to the Federal Central Tax Office (BZSt). Typical payers include event organizers and licensees. They have to e-file tax returns with the BZSt and pay the calculated taxes to the BZSt every quarter. This is very similar to the wages tax procedure in which employers are required to withhold and pay tax from employees’ paychecks.

Applications for relief

Foreign payees can claim a refund of the withholding tax that a payer has withheld and paid for them under Section 50a EStG as long as the applicable double taxation agreement (DTA) fully or partially exempts the remuneration from German taxation. Alternatively, payees can apply for a certificate of exemption before the remuneration is paid. If payers have one of these certificates in their possession when they pay the remuneration, they can either withhold tax at a lower rate or refrain from withholding tax altogether.

Please note that the foreign payees have to file these applications for "relief" (i.e. refunds and exemptions). Payers have very few rights to participate in or obtain information about the applications. This is largely due to tax secrecy and the fact that the BZSt occasionally requests and evaluates highly sensitive information about the foreign payee, particularly during its tax evasion evaluation (Section 50d (3) EStG). Foreign payees can authorize payers or other persons to file requests and perform other actions in the procedure.

Exemption option

Payers, for their part, can in cases with minor tax significance make use of the exemption option under Section 50c para. 2 sentence 1 no. 2 EStG to reduce withholding tax under Section 50a EStG or to exempt a payment entirely. The exemption option applies in cases of payment for licensed rights under Section 50a para. 1 no. 3 EStG that was paid after December 31, 2021. This includes all transactions of money or with a monetary value (such as benefits in kind and barter transactions). A separate application is not required. The main convenience lies in the fact that the foreign payment creditor does not have to apply for an exemption. The payment debtor does not have to deduct the tax separately, or make one at a lower tax rate. The latter is true if the relevant double taxation agreement (DTA) includes a "residual tax” in its licensed item. This new exemption option is subject to a tax-free threshold.

Diagram: The "participation triangle" in the tax withholding and relief procedure

Das „Beteiligungsdreieck“ im Steuerabzugs- und Entlastungsverfahren


Bundeszentralamt für Steuern

Referat St II 9 Abzugsteuern
An der Küppe 1
53225 Bonn

Phone: +49 228 406-1200
Fax: +49 228 406-3200


Withholding tax