Back to home
German Tax and Legal News

German draft law centralizes responsibility for EU law based WHT claims

The draft law on the modernization of the withholding tax relief law (AbzStEntModG) clarifies responsibility for Denkavit / Fokus bank claims.

The draft law is focused on the streamlining and digitalization of the existing procedures for the relief from withholding tax on dividends and royalties for foreign taxpayers but also includes other elements, namely proposed changes to the German anti-treaty-shopping rule  (see GTLN dated 24 November 2020) and rules changing the taxation of non-residents with German-registered rights (see GTLN dated 23 November 2020).

In addition to that, the draft act would centralize all withholding tax relief procedures with the Federal Tax Office (Bundeszentralamt für Steuern, BZSt), which would have significant impact on reclaims filed by foreign recipients of German dividends claiming that the withholding tax violated the fundamental freedoms: In the last decade the Court of Justice of the European Union (CJEU) established in more than a handful of cases (e.g. in the Denkavit, Amurta, Aberdeen Property and Santander cases) a European case law that tax rules, pursuant to which a withholding tax is levied on dividends paid to non-resident entities when similar resident entities benefit from are exemption, are in fact contrary to the EU law principles. The CJEU ruled that the levy of a withholding tax on dividends paid to foreign shareholders is a restriction of the fundamental freedoms in the Treaty on the Functioning of the European Union (TFEU) when such dividends would not be taxed when paid to a comparable domestic entity.

Despite the settled case law, many EU member states have refused to grant refunds or have imposed burdensome formalities that make a successful refund claim difficult. In Germany, reclaiming the WHT was extremely burdensome as there was no clear competency assigned within the tax authorities, so usually reclaims were filed with the local tax offices responsible for the taxation of distributing entities as well as the BZSt, resulting in a huge number of parallel reclaims filed, especially for institutional investors. Within the draft law Germany will centralize the responsibility also for EU law based withholding tax reimbursement claims in respect of dividend distributions to all types of nonresident investors (pension funds, insurance companies, etc.) to the Federal Central Tax Office (BZSt).

The draft law would therefore clarify the responsibility and would force the tax authorities to process the pending reimbursement claims, as long as they initially had been filed with a competent tax office. Based on recent case law EU based WHT refunds should bear interest (0.5% for each month) since the date of application. Nonresident taxpayers that suffered withholding tax should monitor developments and check their past filings to prepare for potential discussion with tax authorities on additional documentation and evidence.


Bundesfinanzministerium, Referentenentwurf eines Gesetzes zur Modernisierung der Entlastung von Abzugsteuern und der Bescheinigung von Kapitalertragsteuer dated 19 November 2020

Your Contacts

Dr. Alexander Linn
Tel.: +49 89 29036 8558

Benedikt Alexander Pignot
Tel.: +49 89 29036 8488 Diese Mandanteninformation enthält ausschließlich allgemeine Informationen, die nicht geeignet sind, den besonderen Umständen eines Einzelfalles gerecht zu werden. Sie hat nicht den Sinn, Grundlage für wirtschaftliche oder sonstige Entscheidungen jedweder Art zu sein. Sie stellt keine Beratung, Auskunft oder ein rechtsverbindliches Angebot dar und ist auch nicht geeignet, eine persönliche Beratung zu ersetzen. Sollte jemand Entscheidungen jedweder Art auf Inhalte dieser Mandanteninformation oder Teile davon stützen, handelt dieser ausschließlich auf eigenes Risiko. Deloitte GmbH übernimmt keinerlei Garantie oder Gewährleistung noch haftet sie in irgendeiner anderen Weise für den Inhalt dieser Mandanteninformation. Aus diesem Grunde empfehlen wir stets, eine persönliche Beratung einzuholen.

This client information exclusively contains general information not suitable for addressing the particular circumstances of any individual case. Its purpose is not to be used as a basis for commercial decisions or decisions of any other kind. This client information does neither constitute any advice nor any legally binding information or offer and shall not be deemed suitable for substituting personal advice under any circumstances. Should you base decisions of any kind on the contents of this client information or extracts therefrom, you act solely at your own risk. Deloitte GmbH will not assume any guarantee nor warranty and will not be liable in any other form for the content of this client information. Therefore, we always recommend to obtain personal advice.