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). For all LuxCSD accounts (at LuxCSD) relevant for all non-German depository banks that do not act as a German withholding tax agent, and at LuxCSD (relevant for all customers), 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).
Taxable income paid to a foreign investment fund pursuant to § 1 InvStG
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. Customers 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 LuxCSD 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 LuxCSD 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.
Current situation
KESt and SolZ are not deducted by LuxCSD 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 current tax deduction logic is applied. If no tax base parts are delivered, the income amount is taken as the tax base.
LuxCSD does not process distributions of tax liquidity.
Dividends and similar income in German equities, participation rights and convertible bonds, held by a fund for their clients can be processed by LuxCSD 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 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).
Foreign investment funds with tax-privileged German or comparable foreign investors or special investment funds opting for transparency pursuant 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 requirements 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: LuxCSD 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, LuxCSD 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 LuxCSD with the full tax rate of 26.375%.
End investors must reclaim the tax exemption individually from the local tax authority (Betriebsstätten-Finanzamt) of LuxCSD:
Finanzamt Wiesbaden I
Dostojewskistraße 8
D-65187 Wiesbaden
(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 LuxCSD or directly to the Federal Central Tax Office (Bundeszentralamt für Steuern; BZSt):
Bundeszentralamt für Steuern
D-53221 Bonn
CSV upload data for German Tax Breakdown
The German Tax Breakdown template 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 | LuxCSD customer account number (from tax point of view the account number of the LuxCSD customer):
| M | Numeric | |
Event type | Event type number | O | Numeric | In LuxCSD: 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 | LuxCSD: Valid KADI processing number (announced via MT566 and KADI list in LuxCSD). |
ISIN | ISIN of event to be processed with account segregation | M | Alphanumeric | LuxCSD: Valid ISIN in WSS, “Lagerland“ = 99 |
BID | Unique event identifier | O | Numeric | LuxCSD: 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 |
Customer-Ref | Individual reference used by customer | O | Alphanumeric | |
Upload-Ref | Upload Reference, which was reported to the customer | O | Alphanumeric |
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a. Technically a tax exemption was implemented, but LuxCSD is not in the position to support this.