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The Federal Ministry (BMF) has clarified that fees received by foreign platform operators and Internet service providers for the placement or placement of electronic advertising on Internet pages are not subject to German tax deduction pursuant to § 50a EStG. Therefore, online advertising expenses are not subject to withholding tax (BMF v. 3.4.2019 - IV C 5 - S 2411/11/10002).




Local tax offices, for example in Bavaria, North Rhine-Westphalia and Rhineland-Palatinate, have recently started to declare online marketing no longer as a service, but as "transfer of use of rights and similar experiences" in the sense of § 49 passage 1 no. 9 EStG, involving foreign companies.

The consequence: Income from this would then be subject to withholding tax at a tax rate of around 15 percent within the meaning of § 50a EStG.


This would have severely restricted the competitiveness of German companies. At the beginning of March 2019, the central business associations had already informed the Federal Ministry of Finance that such withholding tax retention is not according to the law and urged a nationwide clarification. At a joint meeting in mid-March 2019, the Federal Government and the states agreed that withholding tax would not be covered by the legal situation. So the Bavarian Ministry of Finance had announced this opinion in a press release on March, 14 th 2019.


In a letter dated April, 3 rd 2019, the Federal Ministry of Finance has now clarified that, contrary to the practice of tax offices before, online advertising measures on foreign Internet platforms are not subject to withholding tax deduction:


Remuneration received by foreign platform operators and Internet service providers for the placement or brokerage of electronic advertising on Internet pages is not subject to withholding tax pursuant to § 50a passage 1 no. 3 EStG. They are not paid for a temporary transfer of rights pursuant to § 49 passage  1 no. 2 letter f EStG or for the use of commercial, technical, scientific or similar experience, knowledge and skills pursuant to § 49 passage  1 no. 9 EStG.


Therefore, the debtor of such remuneration is not obliged to withhold, pay and declare the withholding tax pursuant to § 50a passage 5 EStG in conjunction with § 73e EStDV.


This applies to fees for advertising for inquiries in online search engines, via brokerage platforms, for social media advertising, banner advertising and comparable other online advertising and regardless of the conditions under which the remuneration is due on the basis of the specific contractual relationship (e.g. cost per click, cost per order or cost per mille, revenue share).


Is the digital tax off the table now, too?

The question is whether the digital tax on online advertising measures has now been settled. It is well known that at EU level it has not yet been possible to agree on a common approach. The plan to introduce an EU-wide sales tax on digital advertising revenues of three percent from 2021 did fail in March 2019 due to the necessary unanimity (Art. 110 et seqq. AEUV).

However, Austria now wants to "take the lead":


An obligation for digital merchant platforms will be introduced there. Internet companies with a worldwide turnover of more than 750 million euro are to pay five percent tax on the advertising profit generated online in Austria in future. It seems to be only a matter of time before other EU states follow this example.

Since the Internet does not stop on borders, only a mulitlateral EU digital tax makes sense.


Source: German Federal Ministry

Press realease 03.04.2019 – IV C 5 – S 2411/11/10002




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