German Investment Tax Act Reform – Introduction of standing instruction service

Further to our Announcement D17047 regarding the implementation of the new German Investment Tax Act “Investmentsteuergesetz; InvStG”, Clearstream Banking AG¹ informs customers that standing instructions will be offered for positions on a segregated omnibus account. This new standing instruction service will be introduced effective

1 May 2019

Setting up the standing instructions

To use the new standing instruction service, customers must

• open an omnibus account (main account, for example xxxx/000); OR
• use an existing omnibus account

on which they hold only securities subject to German withholding tax for entitled and certified fund companies or segregate the securities on the account for this purpose.

If segregated, non-German securities can also be used on the omnibus account. For these the current procedure remains unchanged.

In addition, customers must complete and sign the attached request (“Auftrag zur Abrechnung von Erträgen mit dem ermäßigten Kapitalertragsteuersatz i.S.d. § 7 Abs. 1 InvStG”; an English version for information only is attached as well) and send it to CBF at the following address:

Clearstream Banking AG
attn. Asset Services Frankfurt / Tax Services
Mergenthaleralle 61 
D-65760 Eschborn

After receipt of the request, CBF will check the signatures and flag the omnibus account so that all income payments subject to German withholding tax will be paid automatically with the reduced tax rate of 15% (withholding tax standard rate of 14.218% plus a solidary surcharge (Solidaritätszuschlag; SolZ) of 5.5% of the standard rate) to customers. The tax reduction will processed automatically at payment date of the event for settled positions on the omnibus account and for each compensation of market claims including potential tax credit.

Reporting via the BO Upload application

For monthly tax declaration and external tax audit purposes, customers must provide a break down to disclose the fund company (identified via the Ordnungsnummer) and the relevant linked holdings of the fund company per single income payment. Customers must provide detailed information latest 30 days after the record date of the event. The information must be provided to CBF via the existing process of the BO Upload application by choosing Germany / German Reporting Standing Instruction InvStG.

Note: If the customer provides the reporting details within the 30 days after the record date of the event (as described above) but with differences to the already paid and compensated dividends on the omnibus account, CBF will cancel the payments with the reduced tax rate and repay the full tax rate. CBF will reserve the right to debit customers with a special fee for cancelation and recalculation.   

Customers must upload the “Reporting Standing Instruction InvStG” CSV file including the following information:

The event type and BID are provided 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 will also be printed in the summary of income and fees on the KD110 report.

How to avoid rejection of the CSV file

To avoid a rejection of the break down, customers must:

• Only use and upload the provided CSV template and no other CSV file or Excel file where the file extension was renamed to CSV.
• In the CSV file:
  • use only decimal points (“.”) as a separator for fractions and decimals instead of a comma (“,”).
  • not add or delete columns;
  • not rename the headers;
  • not insert blank lines, comments and notices; or
  • not use special characters, for example !,”,#,$, / and blanks.

Note: Any rejected BO Upload requests for tax reduction will be charged.

Pricing

The applicable fees will be available in section 3.2 Withholding tax services of the Clearstream Banking Fee Schedule.

The fees for standing instructions will be the same as for reduced tax rate at source or immediate refund for eligible foreign investment funds investing in German securities subject to German withholding tax.

A review of these fees is planned at the end of the year.

Market and reverse claim process

The market claim and reverse claim process and the booking of tax credits based on the daily tax adjustment calculation remain unchanged (please refer to CBF Compensation Handbook) except for one difference in the calculation of market claims and tax credits, which will be calculated with the reduced tax rate at 15% instead of 26.375%.

Tax vouchers

Upon request, CBF provides tax vouchers for funds, whereby a validation is processed against the nominal of tax reductions.

CBF assumes that there will be no change to the official template for tax voucher for payments before 1 January 2018. The requirements for issuance of a tax voucher to a CBF customer for their own holdings or holdings of their clients remain unchanged (please refer to Announcement C19014).

Note: CBF has also the opinion that no tax voucher will be requested for dividend payments with reduced tax rates.

Processing of tax reclaims resulting from double taxation treaties (DTT) at the German Federal Central Office

CBF agrees with the notion that there will be no need to start a tax reclaim based on a DTT for payments with reduced tax rates based on standing instruction.

In general, the requirements for processing tax reclaims resulting from DTT of the German Federal Central Office remain unchanged (please refer to Announcement C19014).

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1. Clearstream Banking refers 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.