On April 6, 2022 the European Commission published the key decisions of its April infringements package. The package contains one decision regarding taxes. The Commission decided to send a letter of formal notice to Germany requesting Germany to amend its legislation regarding taxation of dividends and interest paid to charitable organisations.
Under German tax law, dividends and interest paid to charities having their legal seat or the place of management in Germany are either exempt from withholding tax, or withholding tax is refunded.
However, dividends and interest paid to comparable charities established in other EU and EEA Member States and third countries are taxed at a rate of 25% unless a relevant Double Tax Agreement provides for a reduced rate. This difference in treatment of domestic and cross-border dividend and interest distributions to charities seems to constitute a restriction on the free movement of capital, guaranteed in Article 63 TFEU and Article 40 EEA. If Germany does not provide a satisfactory response within the next two months, the Commission may decide to send a reasoned opinion.
The April infringements package: key decisions can be found here.
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