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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