Germany-US treaty: status and key articles
The Germany-US tax convention is one of the most comprehensive bilateral tax treaties globally. Current version with the 2006 Protocol covers income tax, dividends, royalties, interest, capital gains, pensions, and residency tie-breakers in detail.
- Article 7 (Business Profits): German-resident business profits are taxable only in Germany without US PE.
- Article 10 (Dividends): 0% in qualifying parent-subsidiary cases (10%+ ownership, 12-month holding). 5-15% otherwise.
- Article 11 (Interest): 0% on most portfolio interest.
- Article 12 (Royalties): 0% on most royalty types (one exception: 5% on certain software royalties).
- Article 23 (Relief from Double Taxation): German FTC mechanism for US tax paid.
Withholding rates by income type for German residents
| Income type | Default US rate | Germany treaty rate |
|---|---|---|
| US-source dividends (parent-sub qualifying) | 30% | 0% |
| US-source dividends (10%+ ownership) | 30% | 5% |
| US-source dividends (standard) | 30% | 15% |
| US-source portfolio interest | 30% | 0% |
| US-source royalties (copyright, most types) | 30% | 0% |
| US-source royalties (software, some interpretations) | 30% | 5% |
| Business profits without US PE | Generally not taxed | Generally not taxed |
How the Finanzamt treats US LLCs
German tax authorities (Finanzamt) generally recognize US single-member LLCs as transparent (Personengesellschaft equivalent) for German tax purposes. LLC operating income flows through to your German Steuererklärung and is taxed at German progressive income tax rates.
Few special elections are typically needed for clean transparent treatment. The Finanzamt's longstanding position is to look at the LLC's operating agreement and member rights, and most single-member Wyoming LLCs pass through cleanly. Multi-member LLCs may have more nuanced treatment.
How to file W-8BEN-E from Germany
- Line 1: LLC legal name
- Line 4: Chapter 3 status: Disregarded Entity
- Line 5: Country of residence: Germany
- Line 6: Permanent residence address in Germany
- Line 8: US TIN (EIN)
- Line 9: Foreign TIN (your German Steuer-ID or Steuernummer)
- Part III: claim treaty benefits citing Article 10 for dividends. For 0% claims under Article 10(3), document the parent-subsidiary qualifying relationship.
Common mistakes by German founders
- Not filing Anlage AUS (foreign income) on German Steuererklärung
- Not filing W-8BEN-E with US payers (30% default applies)
- Missing Form 5472 + 1120 ($25K penalty)
- Triggering Gewerbesteuer (trade tax) on what should be foreign-source income
- Missing Außensteuergesetz (AStG) CFC review for passive holding structures
- Confusing W-8BEN with W-8BEN-E