German Investment Tax Act (InvStG)
The German Investment Tax Act (Investmentsteuergesetz; InvStG) entered into 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 accounts at Clearstream Banking S.A. (relevant for all clients), 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)
KESt and SolZ are not 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. 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% (withholding tax standard rate including solidary surcharge). As of 1 July 2021 this per payment information must be provided to Clearstream Banking 30 calendar days after the record date of the taxable income event latest, using the existing Upload Beneficial Owner List functionality.
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 calendar days after the record date of the taxable income event, 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 foreign investment funds is 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.
Dividends and similar income in German equities, participation rights and convertible bonds, held by an investment fund subject to full company tax rate in Germany (“unbeschränkt körperschaftsteuerpflichtig”) can be processed by Clearstream Banking at the reduced tax rate of 15% (14.218% KESt standard rate plus SolZ of 5.5% of the standard rate), if evidence is provided (Fund Status Certificate) that the fund is classified as a fund pursuant to § 1 InvStG or a special investment fund pursuant to § 53 InvStG.
If the investment fund provides a Fund Status Certificate, the tax is reduced to 15% (KESt standard rate of 14.218% plus a SolZ of 5.5% of the standard rate).
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 must be executed by Clearstream Banking with the full tax rate of 26.375%.
End investors must reclaim the tax exemption individually from the local tax authority (Betriebsstätten-Finanzamt) of Clearstream Banking:
Finanzamt Wiesbaden I
Dostojewskistraße 8
65187 Wiesbaden
Germany
(Clearstream Banking AG Tax-ID / Steuernummer: 040 220 13205)
Note: Reclaims based on a Double Taxation Treaty (pursuant to §50d EStG) must be sent via Clearstream Banking or directly to the Federal Central Tax Office (Bundeszentralamt für Steuern; BZSt):
Bundeszentralamt für Steuern
53221 Bonn
Germany
CSV upload data for German Tax Breakdown
The German Tax Breakdown template to request tax reductions for investment funds subject to full company tax (“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 it is the account number of CBF client):
| 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 or 0 a |
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 |
------------------------------------------------
a. Technically a tax exemption was implemented, but Clearstream Banking is not in the position to support this.
CSV upload data file for Reporting standing instruction
This service is offered only to Clearstream Banking AG (CBF) clients.