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Posted by nearly_blind on August 10, 2007, 2:03 am
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A large German company is purchasing a software license from
my US company. They say that they must withhold 21.1% for
corporate income tax unless we get a Certificate of
Exemption from the German goverment (by submitting an
appropriate form along with a US 6166 certifcation that we
are a US corporation). The problem is that the Certificate
from the German government may take several months to
receive. Germany and US have a tax treaty that says license
fees are taxed only in the Licensor's country. It seems that
the German government certificate certifies that we are
exempt under these provisions.
My question is, if the 21.1% tax is withheld (we don't wait
for the certificate from Germany before delivering the
software and billing), can the full amount of the taxes paid
to Germany be applied as a credit against our US corporate
tax (the withheld amount is small relative to the federal
taxes that would be due this year)?
If so, is there any financial reason to apply or wait for
the certificate besides the civic interest of having the
taxes go to the US government instead of Germany?
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