UK: Total Buyout & Copyrights – Highest German Tax Court Confirms Application Of German Withholding Tax

Last Updated: 5 June 2019
Article by Jens-Uwe Hinder and Lukas Kawka


Under German tax law, remunerations paid abroad by persons/companies resident in Germany for the "temporary" transfer of rights/grant of exploitation rights are subject to German withholding tax ("WHT") of 15.825%. No WHT applies in cases where such rights are transferred/granted "permanently."

According to the controversial opinion of the German tax authorities, copyrights/exploitation rights that are subject to German copyright law cannot be transferred/granted "permanently" from a German tax perspective.

In its decision dated October 24, 2018, I R 69/10, published on April 17, 2019, the German Federal Fiscal Court (Bundesfinanzhof, "BFH") confirmed the view of the German tax authorities. The BFH decided that even if exclusive exploitation rights, not limited in terms of content, time or place, were granted for a copyright against payment of a one-time lump sum (total buyout), such payments would generally remain subject to WHT.

This decision applies in all cases where the contracting parties agree that the underlying total buyout agreement is to be governed by German law. However, WHT may also apply if the parties choose to apply the laws of another jurisdiction that permit the permanent transfer of a copyright from a German tax perspective. The parties should consider the WHT exposure when entering into the underlying agreement and examine whether the WHT rate can be reduced under a Double Taxation Agreement, upon application to the German tax authorities.


Remunerations paid by German residents to foreign right holders for the "transfer of rights or the right to use rights" (including copyrights/exploitation rights for a copyright) are generally subject to WHT of 15.825% (including solidarity surcharge). The German remuneration debtor must deduct the WHT from the gross amount of the remuneration and pay the WHT to the German tax authorities. The WHT rate amounts to 18.8% if the foreign right holder is entitled to a net remuneration free of any tax deductions (gross-up clause) under the relevant license agreement.

However, WHT is generally only levied if the rights are transferred "temporarily" (e.g., grant of exploitation rights to a patent under a license agreement for a limited period of time). A right is also considered to have been temporarily granted if it is uncertain whether and when the transferred right to use a right/exploit a right will end. In contrast, a temporary transfer of rights does not exist if the transferred right is to remain permanently with the acquirer. The "sale" of a right is therefore generally not subject to WHT. Such sale also exists if the transferred right is completely consumed economically during the granted term, e.g., in the case of a right related to an event or an advertising campaign.

It was disputed whether a copyright/exploitation right in a copyright could be transferred "permanently" for German tax purposes due to the specifics of German copyright law. The German tax authorities had denied such a possibility and held that a WHT deduction obligation existed in such cases.


In the decision of the BFH, a German media company engaged a UK company and two authors with the development and revision of an existing screenplay and the creation of a new one. The UK company and the authors irrevocably granted the German media company the exclusive right, not limited in terms of content, time or place, in particular for film/television purposes, for the worldwide exploitation of the work and for all uses in return for a lump-sum payment. The parties agreed that the underlying total buyout agreement was to be governed by German law.

Although the exploitation rights were granted for an unlimited period of time, the tax authorities held that the corresponding remuneration to be paid by the German media company was subject to WHT. The BFH affirms the decision of the German tax authorities and rejects the view of the German media company that the "total buyout" of a copyright could be considered as a "sale" (i.e., a permanent transfer) of a right for the following reasons:

  1. In accordance with the specifics of German copyright laws, the copyright is, in principle, inalienable by its very nature. Instead, the author of the copyright can only grant or transfer rights of use/exploitation rights to his copyright. Even if such rights can be granted permanently, this cannot be considered as a sale of the copyright itself.
  2. Under German copyright law, every author generally has a continuing contingent claim to further profit sharing (pursuant to Sec. 32a of the German Copyright Act) if the agreed remuneration is noticeably disproportionate to the proceeds and benefits to be derived from the use of the work in the future. Since this claim cannot be waived in advance (or in the course of a total buyout agreement), the author retains at least certain economic substance in the copyright. Therefore, the copyright cannot be considered as "economically" sold.

As a result, the remuneration paid by the German media company to the foreign authors in connection with the total buyout was subject to WHT.


The decision has significant practical relevance, as it leads to the fact that remunerations paid abroad for the granting of exploitation rights – that are subject to German copyright law – are generally always subject to WHT. This applies irrespective of whether the parties agree on a temporary or an unlimited grant of exploitation rights.

The respective exploitation rights are generally subject to German copyright law and, thus, to WHT if the parties agree that their agreement is to be governed by German law. However, even if the parties choose to apply the laws of another jurisdiction that permit the permanent transfer of a copyright, certain provisions of the German copyright law may remain applicable. In particular, foreign authors/copyright holders may be entitled to a "continuing contingent claim to further profit sharing," pursuant to Sec. 32a of the German Copyright Act. This applies, for example, to the extent the copyright will be exploited in Germany under the relevant license/total buyout agreement. As the existence of such (potential) claim was invoked by the BFH in its decision to justify WHT liability, it may be concluded that WHT liability cannot be avoided in such cases by choosing the application of a foreign law. Nevertheless, this should be verified on a case-by-case basis.

The corresponding WHT can lead to a considerable financial burden for the parties concerned. However, it has to be noted that Germany has entered into Double Taxation Agreements (Doppelbesteuerungsabkommen, "DTA") with more than 90 countries worldwide, which may provide for reduced WHT rates. In particular, many of the DTA provide for 0% (e.g., DTA USA) or 10% (e.g., DTA China) tax rates. A full exemption from WHT may also be applicable to intragroup license payments under the requirements of the EU Interest and Royalties Directive. Nevertheless, these reduced rates are in any case subject to the foreign author's/copyright holder's filing of a respective application with the German Federal Central Tax Office ("BZSt"). In addition, foreign companies are only entitled to such reduced rates if they meet the requirements of strictly enforced "anti-treaty shopping rules." As the processing period for such applications is generally three months, foreign authors/copyright holders should review as soon as possible whether they are eligible for such reduced tax rates and, where appropriate, submit the relevant applications. If a full exemption from WHT under a DTA is not possible, alternative licensing structures may be considered.

In any case, the parties should consider the potential WHT exposure when negotiating and concluding the relevant agreements.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions