Italy-Germany Double Taxation Treaty

Italy and Germany have entered into an agreement for the avoidance of double taxation in 1989. The agreement was ratified by both countries in 1992.  The double tax treaty between Italy and Germany applies to both German and Italian resident citizens and companies. The treaty covers the following:

• - in Italy, the taxes on: income, local income and corporate tax;
• - in Germany, the taxes on: individual income, capital, land, trade and the corporate tax. 

The Italy-Germany double taxation agreement also specifies that both countries will notify each other about changes brought to their taxation system that could affect the enforcement of the convention.

Permanent establishments according to the Italy-Germany double tax treaty

The double taxation treaty between Germany and Italy contains specific provisions about determining tax residency for German and Italian companies in order to establish their taxation based on the content of the agreement. Permanent establishments are defined as:

• - places of management,
• - branch or representative offices,
• - factories and building or construction sites,
• - places where natural resources are extracted.

Our Italian lawyers will provide you with more information about tax residency according to the double tax treaty with Germany.

Taxation according to the Italy-Germany double tax treaty

The agreement for the avoidance of double taxation Italy signed with Germany specifies that immovable property held by a German or Italian citizen or company in the other country may be taxed by the other state based on mutual agreement. The tax will be levied according to state applying the tax. 

With respect to business profits, German and Italian companies will be taxed in their resident countries, unless they carry out business activities in the other state. In this case, the business profits earned in the other state, that income will be taxed in the other state.

The Italy-Germany double tax agreement also stipulates the following tax rates for the distribution of dividends, interest payments and royalties:

• - a 10% tax rate for Italian company distributing dividends to a German company holding at least 25% of the voting power in the Italian company and 15% in all other cases,
• - interests will be taxed at a 10% rate,
• - royalties will be taxed at a 5% rate.

For more information about the tax agreement with Germany, please contact our law firm in Italy.