Securities lending
Domestic income from participations of an investment fund includes income generated in connection with securities lending or repurchase agreements. As a rule, the tax authorities levy tax on the borrower of the securities through tax deduction. In the case of non-resident taxpayers, they request the tax from the lender of the securities.
Important note regarding the use of forms:
Please use the form provided for the notification of securities lending and securities repurchase transactions for which no tax deduction was wrongly made.
Legal Information
Among other things, investment funds and their income from participations are subject to corporate tax. This also includes all fees, revenues and earnings generated on the basis of the assignment or transfer of shares in a German corporation as part of securities lending (securities loan) and repurchase agreements. However, the liability to pay tax for these payments arises only if earnings are generated from the assigned or transferred shares during the period of the assignment or transfer (cf. Circular of the Federal Ministry of Finance of 15.05.2018).
Corporate tax is in general collected by deduction at source. Liable for the payment of tax deduction amounts is the debtor of the capital income (borrower of the security). If this is a non-resident taxpayer, tax is not deducted at source. In such cases, the collection of tax deduction amounts from the creditor of the capital income (lender of the security) is carried out by way of subsequent tax assessment. The creditor must notify the competent revenue authority about income from participations, for which tax at source has wrongly not been deducted. This applies regardless of whether the conditions for an entitlement to refund pursuant to a Double Taxation Agreement (DTA) have been met. If the management of the legal representative of the investment fund is abroad and if the investment fund achieves only domestic income which is subject to deduction of tax, then the BZSt is the competent authority for the subsequent tax assessment of tax deduction amounts. The provided form to notify of notifiable income from participations must be used in such cases.
Whether Germany has the right to withhold tax at source for domestic income from participations pursuant to the respective DTA is examined during processing of the notification. Thus, applying for a refund of capital gains tax with the BZSt pursuant to Section 50d EStG is therefore not necessary.
Questions and Answers
Who is obliged to file a notification?
Only investment funds within the meaning of Section 1 German Investment Tax Act (InvStG) 2018 are obliged to file a notification. This applies also to special investment funds within the meaning of Section 26 InvStG 2018.
When is it necessary to file a notification?
Filing a notification is only necessary if, wrongfully, no tax was withheld on domestic income from participation or if the amount of tax withheld on domestic income from participation was too low. This applies also to income the investment fund achieves from securities loans or repurchase transactions of a foreign debtor, and the fund does in general not withhold tax on the basis of the BMF circular of 15.05.2018. Filing a notification is also required if tax withheld has been refunded unlawfully.
What income must be reported in case of securities loans or repurchase transactions?
It is only necessary to file a notification in case of payments from securities loans or repurchase transactions if the domestic corporation makes a distribution during the allocation or transfer of shares. The amount of the notifiable payments is limited to the amount of the gross dividend of the domestic corporation. Besides the actual compensation payment, all other loan and pension compensations are notifiable as payments up to the amount of the gross dividend.
The payments from the securities loan or repurchase transaction do not constitute notifiable income if there is no entitlement to distribution during the allocation or transfer.
In what amount does the domestic income from participation have to be specified?
The deduction of income-related expenses and the loss account is excluded in case of domestic income from participation. Thus, the gross amounts must be specified. Withheld German or foreign tax deduction amounts cannot not be deducted. Payments from an allocation or transfer of shares in a domestic corporation are limited to the relevant gross dividend. Amounts in foreign currency must be converted according to the relevant rate at the time of the inflow. The amount to be specified must be adjusted downward to the full Euro amount.
What exchange rate applies to amounts in foreign currency?
Amounts in foreign currency must be converted according to the average spot exchange rate on the day of the inflow. The relevant Euro reference rate of the European Central Bank can be found on the website of Deutsche Bundesbank.
Is income with existing entitlement to refund pursuant to a DTA notifiable?
Even with an existing entitlement to refund based on an agreement for the avoidance of double taxation (DTA), achieved income is notifiable if, wrongfully, no tax was withheld or if the amount of tax withheld was too low. The collection of tax in an additional demand will be abandoned if the collection of tax would result in an entitlement to refund based on a DTA. An application for refund pursuant to Section 50d German Income Tax Act (EStG) is unnecessary in such cases.
What is the deadline for filing the notification?
The notification must be filed with the BZSt within four months after the end of the financial year.
How can I file the notification?
he notification must be filed using the form "InvSt – Anzeige zur Nachentrichtung von Steuerabzugsbeträgen beim BZSt" (InvSt – Notification of subsequent payment of tax deduction amounts at the BZSt). In addition to the submission in writing, the submission in simple electronic form as an e-mail to the address Ausl.Investmentfonds@bzst.bund.de is admitted. The submission of the attachment (s) in the form of a self-created template is also permitted if it contains at least the information contained in the attachment to the form.
It should be noted that in the case of unencrypted email communication, reading or modifying of messages by a third party cannot be ruled out. The Federal Central Tax Office (BZSt) itself will therefore respond by e-mail only with your explicit consent to unencrypted electronic communication (Section 87a (1), third sentence, German Fiscal Code(AO)).
With whom do I file the notification?
The notification must be filed with the BZSt – Division St II 5 – in Bonn.
The Federal Central Tax Office (BZSt) is only the competent authority for investment funds if the management of the legal representative of the investment fund is based abroad and if the investment fund only achieves domestic income which is subject to withholding tax. This applies also to income the investment fund achieves from securities loans or repurchase transactions of a foreign debtor, and the fund does in general not withhold tax on the basis of the BMF circular of 15.05.2018.
The form on this page cannot be used for the obligation to notify of payments from securities loans and repurchase transactions if the BZSt is not the competent revenue authority for the investment fund. In this case, please contact the competent revenue authority responsible for the investment fund pursuant to Section 4 InvStG 2018.
Do I have to file a separate notification for every income?
No.
The notification is filed for one financial year of the investment fund. All income of a financial year is summarised in one notification. One line for each individual income is to be completed in the appendix to the notification. There is no limitation to the number of appendices to be filed. It is not necessary to file several notifications for income achieved in one financial year.
Who is the debtor of the investment income?
The person actually liable for the deduction of capital gains tax (person liable for the payment of taxes) must be specified as debtor of the investment income. In case of payments from the allocation or transfer of shares in a domestic corporation (e.g. bond lending), the debtor of the investment income is the borrower of the shares.
Which domestic corporation must be specified?
The company which distributes the dividend in Germany must be specified as the domestic corporation. The domestic company whose shares were allocated or transferred must be specified in cases of allocation or transfer of shares in domestic corporations (e.g. bond lending).
What does a certificate of the tax authority of the country of residence look like?
The certificate confirms that the investment fund held its registered office or place of management at the address specified in the notification at the time of the inflow of the listed income from participation, and that the investment fund is therefore eligible pursuant to the relevant agreement for the avoidance of double taxation.
The certificate must be issued by the competent tax authority of the investment fund’s country of residence. Certificates issued by a municipal administration will not be recognised.
If the competent tax authority usually issues such certificate in electronic form only, then the certificate will be recognised in this form.
What is the tax rate for subsequently paid tax deduction amounts?
The rate of capital gains tax, including solidarity surcharge, to be collected from an investment fund is 15% of the income from participation.
Entitlements under an agreement for the avoidance of double taxation (DTA) can be taken into account in the collection of taxes. Thus, a reduction of subsequently payable taxes to under 15% of the income from participation is possible.
Do I have to present a Status Certificate to the BZSt?
No, it is not necessary to present a Status Certificate to the BZSt. If a Status Certificate has been issued, please enter the certificate’s serial number and end of validity in line 8. These details ate sufficient for the reduction of the tax deduction amounts to under 15% of the income.
In what cases do I have to attach form ”InvSt 8 – Fragebogen/Antrag“ (InvSt 8 – questionnaire/application)?
For the initial registration for tax purposes, please attach form InvSt 8 – Fragebogen/Antrag (InvSt 8 – questionnaire/application) as well as relevant documents (e.g. UCITS pass, investment conditions ) if the issuance of a Status Certificate has not been requested and a tax number for the investment fund has not been allocated yet.
What certificates do I have to attach to the notification?
The residency of the investment fund must be proven by a certificate of the foreign tax authority if a claim for relief based on an agreement for the avoidance of double taxation (DTA) exists.
Please do not attach the issued Status Certificate to the notification. For the initial registration for tax purposes, please attach form InvSt 8 – Fragebogen/Antrag (InvSt 8 – questionnaire/application) as well as relevant documents (e.g. UCITS pass, investment conditions ) if the issuance of a Status Certificate has not been requested and a tax number for the investment fund has not been allocated yet.
The withheld tax deduction amounts must be proven by presenting the relevant tax certificates if the amount of tax deducted was too low.
There is no need to attach any further proof. However, the BZSt reserves the right to request necessary proof and other information regarding the indicated income for an in-depth examination. This may concern in particular information and documentary evidence (e.g. contracts, securities account statements, proof of payment) regarding securities loans or repurchase transactions as well as allocated or transferred shares.
Where can I apply for a refund of overpaid tax deduction amounts?
It is not possible to refund overpaid tax deduction amounts with the notification.
In case of an investment fund within the meaning of Section 1 InvStG, and if a refund of capital gains tax is requested on this basis, an application for refund must be filed with the person liable for the payment of taxes (Section 7 (5) InvStG 2018) or the tax office of the permanent establishment (Section 11 (1) InvStG 2018). An application can also be filed with the BZSt pursuant to Section 50d (1) EStG if the respective DTA provides for taxation of under 25% in Germany.
If too much capital gains tax has been withheld for other reasons (e.g. income is not subject to taxation), then an application for refund can be filed with the tax office of the permanent establishment of the person liable for the payment of taxes.
Contact
Bundeszentralamt für Steuern
- Investment tax -
An der Küppe 1
53225 Bonn
Phone:
+49 228 406-3550
Fax: +49 228 406-2661
Mo - Fr von 09:00 - 12:00
Jurisdiction:
Investment tax
