Things are still very much in flux in Germany in the area of taxation of remuneration for the transfer of rights entered in a German register (e.g. patents or other industrial property rights).

Background

Since 2020, the German Federal Ministry of Finance (“Bundesministerium der Finanzen” (BMF)) has surprisingly taken the view that income from such remuneration is subject to taxation in Germany even if no further German nexus exists. Previously, the prerequisite for tax liability was either an own business activity or the residence of the remuneration debtor in Germany. 
The amended legal interpretation also applies retroactively. An exemption from the resulting obligations is possible under the general German rules on withholding taxes, but requires the issue of an exemption certificate which in principle cannot be issued retroactively.

Consequences of the limited tax liability

Because of the limited tax liability, the remuneration debtor must withhold tax totaling 15.825% on royalty payments and other remuneration, as well as declare and pay it to the German Federal Central Tax Office (“Bundeszentralamt für Steuern” (BZSt)). Companies also have to declare and tax proceeds from the sale of rights registered in Germany.
The tax is assessed based on the gross remuneration for the transfer of the right registered in Germany. The assessment becomes problematic and unclear in detail where the contractual agreement does not provide for any specific remuneration for the right registered in Germany. In this respect, the tax authorities follow a "top-down approach", i.e. an appropriate apportionment of the total remuneration is made taking into account the causation principle. However, its application is also unclear in individual cases, thus giving rise to considerable legal uncertainties.
In principle, these obligations can only be waived if the German right of taxation is precluded under a double tax treaty (DTT) entered into with the right holder’s or seller’s country of residence, the requirements of the DTT are met and an exemption certificate is available at the time of the remuneration payment or sale. 

Temporary simplified procedure for certain cases 

To make such considerable change manageable for the companies affected, the BMF has provided for transitional arrangements and simplifications.
According to the simplification regulations issued by the BMF, it is sufficient for an application exemption to have been filed for companies to be exempted from the obligations described above. The exemption does not have to have yet been issued and is possible particularly for payments made in the past. The deadline for the simplified procedure was most recently extended to 30 June 2023 and accordingly applies (retroactively) to all payments and sales up to and including 30 June 2023. The exemption may also be granted for payments beyond this period. 
All income received after 30 June 2023 is subject to the general rules. However, the drafts of the Annual Tax Act 2022 (“Jahressteuergesetz 2022” (JStG 2022)) propose to eliminate the taxation in most of these cases as of 2023 and even retroactively in all open cases for transactions between third parties. According to this, only payments between affiliated companies or in connection with so-called tax havens would still be subject to limited taxation in Germany – in all other cases, the tax liability is to cease if no further German nexus exists (e.g. through utilization of the rights in Germany). This would essentially restore the legal situation prior to the BMF's amended legal opinion.

Conclusion

If the JStG 2022 is passed as drafted, an exemption certificate or withholding taxes should not be necessary in most cases on the enactment of the JStG 2022.
As a precaution, companies should still check whether they have directly or indirectly licensed or sold industrial property rights registered in Germany or are planning to do so in future. This may also be the case if rights registered in Germany are not expressly covered or if no separate remuneration is paid for such rights. 
If the JStG 2022 is not implemented in this form, action must be taken quickly. Even if the deadline of 30 June 2023 still seems a long way off, an exemption certificate might otherwise not be issued in time given the effort required to determine the relevant transactions and prepare the application for exemption. The BMF has previously announced that due to the very high workload of the BZSt, which is responsible for the applications, an application, where appropriate, should be submitted early in order to receive an exemption certificate in time (i.e. by 30 June 2023).