ARTICLE · 01 OCTOBER 1997

079. Foreign Tax Credit Limitation

KPMG Germany

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In an as yet unpublished decision (case no. I R 178/94) in which KPMG Germany represented the taxpayer, the Federal Tax Court was asked to decide a dispute concerning the correct calculation of creditable foreign withholding tax with respect to dividends earned by a German insurance company. The stockholdings were in all cases too small to qualify for the participation exemption. Hence, the tax treaties in question (ten in all including the old version of the U.S. tax treaty) and German domestic law provided for crediting the foreign withholding tax to avoid double taxation.

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