120. Pitfalls Of Sec. 8b KStG

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Sec. 8b KStG was added to the corporation tax act in 1994 in an effort to make Germany a more attractive location for holding companies. This article summarises the benefits conferred by the statute and points out certain difficulties taxpayers can get themselves into.

1. Sec. 8b (1) KStG: Dividends received exemption

Subject to certain limitations, subsection 1 of the statute permits a German corporation to receive tax free dividends from another German corporation provided these dividends are deemed to be funded out of the distributing corporation's tax free foreign-source retained earnings (dividends, branch business profits, income from rental of foreign real property).