BFH ruling on the refund of dividend withholding tax to a U.S. S-corporation

The Federal Fiscal Court (BFH) overturns the tax authorities' position in its ruling of March 11, 2026 – I R 13/23: distributions to U.S. S-corporations remain privileged under the tax treaty – the tax authorities sought to deny the full withholding tax exemption and impose 15% instead but failed before the BFH. By applying a residence-substitution fiction under Art. 1 (7) of the Germany-U.S. Tax Treaty, the withholding tax rate remains at 0% or 5% – Section 50d (1), sentence 11 of the Income Tax Act (EStG), in its former version, merely determines who is entitled to file the refund application, not the amount of the refund itself. Andreas Buchard explains the decision in detail and its implications in the DB-Steuerboard.