German Investment Tax Act (InvStG) (CBF)
The German Investment Tax Act (Investmentsteuergesetz; InvStG) entered effect on 1 January 2018 and significantly changed the taxation of dividends and similar income from investments in German equities, participation rights and convertible bonds held by foreign investment funds.
Situation before 2018
German income paid to a foreign investment fund was subject to 26.375% withholding tax (Kapitalertragsertragsteuer; KESt) and solidarity surcharge (Solidaritätszuschlag; SolZ). This applies to all foreign accounts at Clearstream Banking AG, i.e. to all non-German depository banks that do not act as a German withholding tax agent. 25% KESt and 5.5% SolZ of the tax amount were deducted for German dividends, income of participation rights and taxable convertible bonds as well as for cash distributions and distributions of tax liquidity of German funds. The KESt amount was calculated based on the tax base (Bemessungsgrundlage; parts of the tax base for event type cash distributions and distributions of tax liquidity).
Current situation: Income paid by a German investment fund (distributions)
No KESt and SolZ is deducted by Clearstream Banking for fund distributions of German funds, if evidence is provided that the fund is an investment fund pursuant to § 1 InvStG or a special investment fund pursuant to § 53 InvStG. For funds not certified accordingly, the tax deduction logic for dividend distributions on German equities is applied. If no tax base parts are delivered, the income amount is taken as the tax base.
Clearstream Banking does not process distributions of tax liquidity.
Taxable income paid to a foreign investment fund pursuant to § 1 InvStG as of 1 January 2018
According to the German Investment Tax Act, if a foreign investment fund obtains and provides a Fund Status Certificate for classification of the fund pursuant to § 1 InvStG, the German KESt is reduced to 15% at source irrespective of the location of the fund.
As of 1 January 2023, it is possible to get a reduced taxation for entitled certified investment funds via CBF. This is applicable to client accounts with standing instructions holding positions in taxable German securities on behalf of certified investment funds exclusively. Clients must in this case provide a break down to disclose the fund company (identified by the Ordnungsnummer) and the relevant holdings of the fund company per single income payment to get taxation at a reduced rate of 15% (capital income tax standard rate including solidary surcharge). This per payment instruction must be provided to Clearstream Banking 30 business days after the record date of the taxable income event latest.
If the foreign investment fund provides a Fund Status Certificate including special investment funds not opting for transparency pursuant to § 26 InvStG, the German KESt is reduced to 15% (KESt standard rate of 14.218% plus a SolZ of 5.5% of the standard rate).
If the Fund Status Certificate of a foreign investment fund is submitted after the payment date of the taxable income event and/or the break down to disclose the fund company and the relevant holding per single income event has not been provided to Clearstream Banking within 30 business days after the record date of the taxable income event, Clearstream Banking will withhold the full tax rate. The overpaid KESt amount (11.375%) can be reclaimed by applying the standard tax refund procedure and presenting the relevant documents to the Federal Central Tax Office within the statutory deadline.
As of 1 January 2023 relief at source or quick refund for certified investment funds are not possible any longer for Clearstream Banking S.A. (CBL) clients or Clearstream Banking AG (CBFi) clients holding German taxable securities in an omnibus account. A foreign investment fund can reclaim overpaid tax exclusively from the federal central tax office (“BZSt”). The refund procedure pursuant to Section 11 InvStG for foreign investment funds holding a fund status certificate is outlined on the Federal Central Tax Office website, please refer hereto for detailed information.
Foreign investment funds with tax-privileged German or comparable foreign investors or special investment funds opting for transparency pursuant to § 30 InvStG may even be able to obtain full reclaim for this specific investor type or individual tax rates on end-investor level of German KESt, if certain formal requirements are met. One requirement is proof of the minimum holding period of 45 days over the dividend entitlement date pursuant to § 36a German Income Tax Act (Einkommenssteuergesetz; EStG).
Note: Clearstream Banking does not offer services for full reclaim of German KESt (for tax-privileged German or comparable foreign investors, for example, churches, non-profit organisations, foundations, corporations under public law) or consideration of individual tax status of end investors (for special investment funds opting for transparency pursuant to § 30 InvStG). Consequently, Clearstream Banking cannot consider the Funds Status Certificate for special investment funds opting for transparency pursuant to § 30 InvStG and no tax reduction can be granted. Payments are executed by Clearstream Banking applying full tax rate of 26.375%.
The BZSt has been responsible for processing refund applications from investment funds with limited tax liability pursuant to Section 11 of the German Investment Tax Act (InvStG) since 1 July 2021.
BZSt - Refund procedure pursuant to Section 11 InvStG
Investment funds subject to unlimited tax liability in Germany should contact the tax office of the withholding agent. The local tax office of Clearstream Banking is:
Finanzamt Wiesbaden I
Dostojewskistraße 8
D-65187 Wiesbaden
(Clearstream Banking AG Tax-ID / Steuernummer: 040 220 13205)
Note: In addition to relief at source a quick refund is possible if an investment fund that has unlimited tax liability in Germany (“unbeschränkt körperschaftsteuerpflichtig”) obtains and provides a Fund Status Certificate for classification of the fund pursuant to § 1 InvStG. To gain reduced taxation for eligible investment funds clients must provide a break down to disclose the fund company (identified by the Ordnungsnummer) and the relevant holdings of the fund company per single income payment to get taxation at a reduced rate of 15% (withholding tax standard rate including solidary surcharge). Complete information must be provided to Clearstream Banking within 18 months after the record date of the taxable income event to get a quick refund.
How to disclose entitlements of certified investment funds?
A per-payment instruction must be submitted for each payment where the client has benefitted from a reduced tax rate in accounts with standing instructions. In those accounts, German taxable securities may only be held for certified investment funds.
On 3 July 2023 asset servicing for CBF-issued securities has been migrated to OneClearstream Asset Servicing level (CAH – KADI DE migration to OneCAS). Xact Web Portal has been enhanced to provide clients with an extended tax functionality to improve tax users' experience. Clients can now instruct their BO disclosures in a formatted way using Xact Web Portal or via Xact File Transfer.
The per-payment instruction must contain all relevant fields indicated in the BO Allocation Upload template. Clients must ensure that they download the latest template available from Xact Web Portal under Tax, Instruction, BO Allocation Upload.
Clients using Xact File Transfer can also download the template from Xact Web Portal.
For full formatting requirements of these instructions, clients should refer to the MT564 Corporate Action Notification, to the Xact User Guide and Announcements C18050, C22037 and C23035.
How many instructions are provided? | One for every Clearstream Banking account or several to match the accounts total entitlement |
Who completes it? | Client |
How often is it provided? | Per taxable income event |
Medium? | Via Xact File Transfer or Xact Web Portal |
CSV upload data for German tax breakdown
Only applicable for legacy (KADI) events!
The German Tax Breakdown template to request tax reductions for investment funds with unlimited tax liability (“unbeschränkt körperschaftsteuerpflichtig”) in Germany is available via the BO Upload application under Germany / Tax Breakdown / German Tax Breakdown.
The CSV file must be completed with the following formats before being uploaded to the BO Upload application.
Field name | Description | M/O | Format | Remark |
Account Master | Clearstream Banking client account number (from tax point of view the account number of the Clearstream Banking client with the account number of the client, and not of the applicant.) | M | Numeric | |
Event type | Event type number | O | Numeric | In Clearstream Banking: 110, 120, 126 - Part of MT56X Corporate Action reference (digits 1–3). |
Payment Date | Event Payment Date | M | Numeric | |
KADI Run Number | KADI Run Number | O | Numeric | Clearstream Banking: Valid KADI processing number (announced via MT566 and KADI list in Clearstream Banking). |
ISIN | ISIN of event to be processed with account segregation | M | Alphanumeric | Clearstream Banking: Valid ISIN in WSS, “Lagerland“ = 99 |
BID | Unique event identifier | O | Numeric | Clearstream Banking: Valid event BID (WM data). Part of MT56X Corporate Action reference (digits 4–16). To be completed, if KADI-L-NR is not filled or if event type 110 payment date is not filled. |
COAF | Official Corporate Action Event Reference | O | Alphanumeric |
|
Fund-Ord-Nr | Ordnungsnummer mentioned in the Tax Status Certificate (key field) | M | Alphanumeric | |
Nominal | Nominal of holding to be processed with different tax rate (currently 14.218) or tax exempt (cannot be offered) | M | Numeric | Part of holding or complete holding to be processed with withholding with rate of field tax rate |
KESt-Rate | Tax rate nominal to be processed | M | Numeric | 14,218 |
ID-Tax-R | For reverse instructions number of tax relief/refunds instruction to be reversed | O | "RLF"/"RLD" + 5 digits | Only to be completed, if the field ”Reverse” is ”R”: Valid number of tax relief or refund instruction with account or funds ISIN. |
Reverse | Flag “R” to identify reverse instruction | O | Numeric | R or blank |
Client-Ref | Individual reference used by client | O | Alphanumeric | |
Upload-Ref | Upload Reference, which was reported to the client | O | Alphanumeric |
CSV upload data file for Reporting standing instruction
Only applicable for legacy (KADI) events!
This service is offered only to Clearstream Banking AG (CBF) clients.
For monthly tax declaration and external tax audit purposes, clients must provide a breakdown to disclose the fund company (identified via the Ordnungsnummer) and the relevant linked holdings of the fund company per single income payment. Clients must provide detailed information 30 business days after the record date of the event. The information must be provided to Clearstream Banking via the BO Upload application.
Note: If the client provides the reporting details within the 30 business days after the record date of the event (as described above) but with differences to the already paid and compensated dividends on the privileged omnibus account, with the standing instruction to pay at the reduced rate for certified investment funds, Clearstream Banking will cancel the payments with the reduced tax rate and repay the full tax rate. Clearstream Banking reserves the right to debit clients with a special fee for cancelation and recalculation.
The Reporting Standing Instruction InvStG template is available via the BO Upload application under Germany / Reporting Standing Instruction InvStG.
The CSV file must be completed with the following formats before being uploaded to the BO Upload application.
Field name | Description | M/O | Format | Remark |
Account Master | Clearstream Banking client account number (from tax point of view the account number of the Clearstream Banking client with the account number of the client, and not of the applicant.) | M | Numeric | |
Event Type | Event type number | M | Numeric | 110, 120, 126 - Part of MT56X Corporate Action reference (digits 1–3). |
KADI Run Number | KADI processing number | M | Numeric | Valid KADI processing number (announced via MT566 and KADI list). |
ISIN | ISIN of event to be processed with account segregation | M | Alphanumeric | Valid ISIN in WSS, “Lagerland“ = 99 |
COAF | Official Corporate Action Event Reference | O | Alphanumeric |
|
Fund-Ord-Nr | Ordnungsnummer mentioned in the Tax Status Certificate | M | Alphanumeric | |
Nominal | Nominal of holding to be processed with 15% tax | M | Numeric | Part of holding or complete holding to be processed with withholding with rate of field tax rate |
The event type and BID are provided to Clearstream Banking clients in field 20C::CORP// of the MT564 and MT566. The KADI processing number is reported in the additional text 70E::ADTX// of the MT564 REPE on record date and in the MT566. The KADI processing number is also printed in the summary of income and fees on the KD110 report.