According to the German Foreign Tax Act (Außensteuergesetz – AStG), passive income derived from a non-German corporation which is controlled by a shareholder, who is subject to an unlimited tax liability in Germany, under certain circumstances will be treated as deemed dividend income of the shareholder and, thus, will be included in the tax base of the German resident shareholder. Due to the recently adopted German Tax Reduction Act, the provisions of the German AStG have also been amended. Frank Stockmann describes the amendments and analyses the major consequences for German shareholders of foreign corporations. This also affects non-German ultimate shareholders with German resident subsidiaries and non-German lower-tier companies.