Germany: Implementation of the OGAW-IV Umsetzungsgesetz (UCITS IV Directive)


1 January 2012

far-reaching changes to the tax deduction process for German securities take effect.

These are a result of the approval of the Upper House of the German Parliament (Bundesrat) on 27 May 2011 of the directive on implementing the guideline 2009/65/EC on coordinating legal and administrative regulations concerning undertakings for collective investment (UCITS IV Undertakings for Collective Investment in Transferable Securities Directive).

Fraudulent tax abuse due to short selling past the dividend record date is to be prevented with implementation of the UCITS IV Directive. This is achieved by the changeover of the tax deduction from the issuer to the last domestic paying agent.

In this sense, Clearstream Banking AG, Frankfurt (CBF) shall deduct taxes in cases of dividend and fund distributions for its foreign customers as the last domestic paying agent as well as provide tax liability for capital growth funds. This concerns both income distributions on the basis of holdings as well as compensation for transactions that were traded "cum" and delivered ex.

Relevant Instruments

Income from instruments falling under UCITS IV, which are subject to the German withholding tax, will be taxed by the last domestic paying agent (CBF) once the UCITS IV Directive becomes effective. The following event types are within the scope of the UCITS IV Directive:

  • Dividend distribution;
  • Fund distribution;
  • Tax liability for German capital growth fund (new).

Tax liability for capital growth funds

In line with previous legislation, the capital investment trust forwards the tax liability for capital growth funds to the tax office. This obligation is being transferred to CBF in the wake of the UCITS IV Directive.

Tax liability on holdings

In the frame of providing tax payments, the depository of the investment company is debited by CBF of the tax liability reported in a new income field by WM (data vendor Wertpapiermitteilungen). The tax payment is made on the 10th business day after the payment day and depends on the respective tax status (domestic/foreign).

The amount of the tax liability depends on the taxation basis (business capital (Betriebsvermögen) or personal assets (Privatvermögen)). The following taxation options arise:

Tax liability on business capital

  • Withholding tax on domestic dividends, REIT, real estate and interest income
  • Solidarity surcharge on domestic dividends, REIT, real estate and interest income

Tax liability on personal assets

  • Withholding tax and solidarity surcharge are assessed on the lines of business capital taking church tax (Kirchensteuer; KiSt) into consideration, crediting any tax withheld at source abroad (anrechenbare ausländische Quellensteuer).

The depository of the investment company provides the respectively higher liability amount.

Customers that are considered as domestic residents in Germany are credited with the complete tax liability. Customers that are considered foreign residents receive the tax liability reduced by the withholding tax and solidarity surcharge. When assessing the liability this can result in a reduced tax liability of EUR 0.00 based on business capital. The same is relevant for market claims processing.

Tax liability for market claim processing

In the frame of market claim processing, the gross tax liability is always debited from the seller. The distribution to the buyer depends on the respective status (domestic/foreign).

Note: Customers of Clearstream Banking, société anonyme, Luxembourg (CBL) and all customers of Clearstream Banking AG, Frankfurt (CBF) with "6-series" accounts are considered to be foreign residents.

Tax deductions

All tax deductions will be accompanied by a physical (paper) German tax voucher. Since there will be the pre-requisite to attach physical tax vouchers at beneficial owner level to all tax reclaim forms, CBF will issue individual German tax vouchers per beneficial owner upon request.

In order to avoid double taxation of domestic dividend payments paid via a cross-border depository (for example CBL), discussions are taking place between the German Banking Industry and the German Ministry of Finance with a view to finding a practical solution.

CBF is in contact with the local German tax offices and German Ministry of Finance to clarify open questions about cross border settlement, tax reclaim processing, cross border market claim processing and manufactured dividends.

CBF will continue to follow up and provide further information as and when it becomes available.

Further information

For further information, please contact the Clearstream Banking Tax Help Desk on:

Telephone:+352-243-32835+49-(0) 69-2 11-1 3821
Fax:+352-243-632835+49-(0) 69-2 11-61 3821

or Clearstream Banking Customer Service or your Relationship Officer.

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