Press Release: Direct taxation: Commission requests Germany to end discriminatory rules applied to non-resident tax payers

By a Reasoned Opinion under Article 226 of the EC Treaty, the European Commission has formally requested Germany to modify the withholding tax system applied on the income of certain categories of non-resident taxpayers – particularly artists and sportsmen. According to German law, a flat-rate withholding tax is applied to the total income without any possibility of deducting business expenses. A subsequent refund procedure allows non-resident tax payers to ask for reimbursement of the overpaid tax. The Commission considers the tax deduction at source and refund procedure incompatible with the principle of freedom to provide services in the Internal Market. If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the matter to the European Court of Justice.