Taxes
Foreign withholding tax: what Germany actually credits
The missing 20% of a Swiss dividend is not lost — it is simply claimable elsewhere. Anyone who does not claim it, pays it.
Published · By The Acutic Research Team
A €1,000 Swiss dividend arrives €350 lighter than it was declared. Germany credits €150 of that. The gap is neither a rounding error nor an oversight — it is what the statute says, and anyone who does not actively recover it bears it.
The sentence that governs it
§ 32d (5) sentence 1 EStG sets out the credit in one long sentence:
“… die auf ausländische Kapitalerträge festgesetzte und gezahlte und um einen entstandenen Ermäßigungsanspruch gekürzte ausländische Steuer, jedoch höchstens 25 Prozent ausländische Steuer auf den einzelnen steuerpflichtigen Kapitalertrag, auf die deutsche Steuer anzurechnen.” — § 32d (5) sentence 1 EStG
Three fragments carry the entire practice:
- gezahlte — only tax actually paid is credited, not tax that might have been due.
- um einen entstandenen Ermäßigungsanspruch gekürzt — reduced by any refund claim that has arisen. This is the crux. Where a claim exists against the source state, the foreign tax is reduced by exactly that amount before anything is credited. Whether the claim was exercised is not mentioned. It is enough that it arose.
- auf den einzelnen steuerpflichtigen Kapitalertrag — computed per item, not across an annual pool.
What it costs
Switzerland withholds 35%. The treaty leaves the source state 15% on dividends; the other 20% is refundable on application. A reduction claim therefore exists for precisely those 20% — and precisely those 20% are not creditable in Germany.
| Case | Withheld | Credited | German balance | Total |
|---|---|---|---|---|
| US share, 15% withheld | 150 € | 150 € | 113.75 € | 263.75 € (26.375%) |
| Swiss share, 35% — nothing reclaimed | 350 € | 150 € | 113.75 € | 463.75 € (46.375%) |
| Swiss share, 35% — 20% reclaimed | 350 € | 150 € | 113.75 € | 263.75 € (26.375%) |
On a €1,000 gross dividend at 26.375% German tax, no church tax and no allowance. The only difference between rows 2 and 3 is whether the refund was applied for.
Rows two and three differ in nothing but the refund application. The effective burden jumps from 46.375% to 26.375%, and the €200.00 per €1,000 of gross dividend is the price of not having filed.
The US row shows the unremarkable normal case: where only 15% is withheld, that matches the treaty rate, no reduction claim arises, and the credit is complete. Total burden then equals the German withholding tax exactly.
Who does what
A German custodian normally applies the credit up to the treaty rate automatically, and it appears on the annual tax certificate as anrechenbare ausländische Quellensteuer. Recovering the excess is a separate procedure with the foreign authority that banks usually do not undertake. For Switzerland it has run largely electronically since 2020 and requires proof of German residence.
Which rate applies to which country depends on the treaty; the Bundeszentralamt für Steuern maintains a current overview. A country list inside a blog post would eventually be out of date, which is worse than no list.
And inside funds?
There the question leaves the investor’s sphere entirely. Withholding on dividends inside a fund is borne by the fund, showing up as a drag on performance, and is not creditable for the investor. The Teilfreistellung is the legislator’s flat-rate answer to that pre-burden — compensation, not a bonus.
How the remaining German tax nets against losses and the allowance is in the two loss pots and the Sparer-Pauschbetrag. For foreign positions spread across institutions, the Acutic workspace brings them together without connecting to a bank, with the approach on the methodology page.
Frequently asked questions
Why does Germany credit only 15%?
§ 32d (5) sentence 1 EStG credits foreign tax "um einen entstandenen Ermäßigungsanspruch gekürzt" — reduced by any refund claim that has arisen. For the portion above the treaty rate a claim exists against the source state, and that is precisely why it is not creditable here. It is not lost; it is claimable somewhere else.
What if I never reclaim it?
Then you bear the difference permanently. Germany does not compensate for it, because the claim against the source state existed — whether it was exercised makes no difference to the credit. In the example above that is €200 per €1,000 of gross dividend.
Does the bank handle this?
A German custodian normally applies the credit up to the treaty rate automatically in its withholding. Recovering the excess is a separate procedure with the foreign tax authority and is usually not done by the bank, though some offer it as a paid service.
Does this apply to ETFs holding foreign shares?
At fund level yes, but not in the investor’s own sphere: withholding on dividends inside the fund is borne by the fund and shows up as a drag on performance. It is not creditable for the investor. The Teilfreistellung is the legislator’s flat-rate answer to that pre-burden.
Which rate applies to which country?
It depends on the relevant double tax treaty, and these change. The Bundeszentralamt für Steuern maintains a current overview; a list inside a blog post would eventually be wrong, which is worse than no list.
This article is general information, not tax advice within the meaning of German law. For your own situation, consult a Steuerberater:in. Legal position: October 2026.
Further reading: FIFO on a partial disposal, The Vorabpauschale explained and accumulating vs. distributing. Create free account.
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