Ministry of Finance considers general abolition of final withholding tax

Instead of the abolition of the final withholding tax, which was limited to interest income in the coalition agreement, the Federal Ministry of Finance is considering a general abolition.

In the coalition agreement, the grand coalition had committed itself to a possible end to the flat tax on interest income as soon as the German tax offices are informed annually about bank accounts and interest income of German investors abroad through the international exchange of data. This goal is expected to be reached in 2020. According to reports in the press, however, the Federal Ministry of Finance is now considering a complete abolition of the flat tax. This would go far beyond what was agreed in the coalition agreement and, without corresponding changes to corporate income tax and trade tax, would put corporations in a significantly worse tax position than partnerships. By contrast, if the flat tax were abolished only on interest income, the ministry fears a new wave of tax-saving schemes.