Germany: Abolition of the withholding tax relief procedures for foreign investment funds
Further to Announcement C21032, Clearstream Banking1 informs customers that effective
immediately
any application for the reversal of overpaid tax, via post-payment disclosure of relevant holdings for already registered fund status certificates, will no longer be possible via Clearstream Banking.
No reduced taxation can be granted for customers’ omnibus accounts as of 1 January 2023. Any tax refund request must be addressed directly to the Federal Central Tax Office (Bundeszentralamt für Steuern; BZSt).
Customers should note that until 31 December 2022, Clearstream Banking AG (CBF) will process tax adjustments based on customer per-payment instructions to disclose the fund company (identified by the Ordnungsnummer) and the relevant holdings of the fund company within 20 business days after the record date of the taxable income event. Provided that the original fund status certificate was recorded before the taxable income payment was due and that the customer sent the complete instructions on time, using the existing Upload Beneficial Owner List functionality.
Background
Previously, customers holding securities in their third party omnibus accounts on behalf of a foreign investment fund, who provided a fund status certificate for classification of the fund pursuant to § 1 InvStG, the German capital gains tax (Kapitalertragsteuer; KESt) was reduced to 15% at source if customers provided an instruction to disclose the fund company and the relevant holdings of the fund company per single income payment to Clearstream Banking 30 calendar days after the record date of the taxable income event latest.
This type of post-payment adjustment, according to the latest circular from the Ministry of Finance, is considered a tax refund. Tax refunds for foreign investment funds can, according to the referenced Investment Tax Act (§ 11 Absatz 1 Satz 3 InvStG), only be granted by the Federal Central Tax Office (Bundeszentralamt für Steuern; BZSt).
Impact on customers
In accordance with the above-mentioned bill and the referenced circular of the Federal Ministry of Finance, any application for the reversal of overpaid tax, via post-payment disclosure of relevant holdings for already registered fund status certificates of the respective foreign investment funds, will no longer be possible through Clearstream Banking. No reduced taxation can be granted in customers’ omnibus accounts as of 1 January 2023.
Any tax refund request must be addressed directly to the Federal Central Tax Office (Bundeszentralamt für Steuern; BZSt).
Until 31 December 2022, CBF will process tax adjustments based on customer per-payment instructions to disclose the fund company (identified by the Ordnungsnummer) and the relevant holdings of the fund company within 20 business days after the record date of the taxable income event, provided the original fund status certificate was recorded before the taxable income payment was due and the customer sent complete instructions on time using the existing Upload Beneficial Owner List functionality, as mentioned above.
There is no change of service for Investment funds subject to full company tax rate (“unbeschränkt körperschaftsteuerpflichtig”) in Germany. Upon customer instruction, CBF will partially refund withheld tax in accordance with the Investment tax act (§7 (5) InvStG). However, CBF cannot exempt investment funds from taxation in accordance with §§ 8 to 10 InvStG.
Other tax certification requirements remain unchanged as described in the Market Taxation Guide - Germany.
Further information
For further information, please contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or your Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.