Germany: Securities funds and German WHT - 2 important German High Fiscal Court decisions

News on tax developments affecting the international Financial Services industry.

In December 2024, the first foreign investment fund received a tax refund under EU law, following a key German court ruling. However, securing timely WHT refunds requires applicants to navigate complex procedural, operational, and documentation challenges.

News on tax developments affecting the international Financial Services industry.

The German Federal Fiscal Court (BFH) recently published two important decisions according to which foreign securities investment funds were discriminated against compared to German investment funds.

The German Federal Fiscal Court's (BFH) recently published its ruling on the “L-Fund case” dated 11 October 2023, following the European Court of Justice judgement of 27 April 2023 (C‑537/20).

On 22 March 2024, the German parliament approved a bill that enacts significant changes applicable to German and non-German Real Estate funds.

It may be of interest to foreign asset managers and custodian banks that the German government recently presented a plan to stabilize the statutory pension system.

For a German private investor the indirect investment in cryptocurrency via CIVs is less tax beneficial than a direct holding of this asset class.

News on tax developments affecting the international Financial Services industry.

WTS and Peters Schönberger & Partner (PSP) are founding an AI joint venture that could shake up the industry. This is because it allows control functions to build their own generative AI applications. It puts pressure on consulting firms and tool providers because it turns their customers into kings.

In its decision of 20 April 2023, the Cologne Fiscal Court awards a Belgian insurance company a refund of German WHT suffered on German portfolio dividends in 2009 under the free movement of capital of European law.

This revision of German VAT law is particularly important for international asset managers with offices in Germany and international investment advisors.

Germany had already applied for the introduction of mandatory electronic invoicing as a special measure under Art. 395 of the VAT Directive in 2022. By decision of 25 July 2023, the Council of the European Union approved this approach.

Recently, the German Ministry of Finance (MoF) presented two new important draft pieces of tax rules in many ways relevant for the international Financial Services industry.

The German tax authorities, together with the legislator, are aiming for mandatory electronic invoicing for certain business transactions as early as January 1, 2025. The amended requirements show clear parallels to the European Commission's proposed directive "ViDA - VAT in the Digital Age".

Telework and hybrid work are present as never before. In the case of multi-state workers, this can unfortu­nately bring about a mandatory social insurance in the other country.

15 December 2022 saw the Council of the European Union reach its unanimous agreement on the “Council Directive on ensuring a global minimum level of taxation for multinational and large-scale domestic groups” in a written procedure.

The new law significantly tightens obligations to cooperate with the revenue authorities in the area of transfer pricing.

The German government presented to the public a memorandum on future legislative measures to improve the financing of investments and to facilitate capital market access for companies, especially start-ups, growth companies and SMEs.

In the course of the German Investment Tax Reform 2018, the taxation of investment funds and their German investors changed fundamentally.

Since 1 January 2019, special taxation rules have applied to vouchers.

Due to the extraordinary burdens for the German taxpayers and tax authorities as a result of the impact of Covid-19, the war in the Ukraine and extensive new land tax declaration requirements in Germany

In its Judgment of 17 May 2022 (published on 29 September 2022), in Case VII R 2/19 "Hamamatsu", the German Federal Fiscal Court (Bundesfinanzhof, BFH) rejected the appeal filed on points of law

16 June 2022 saw the ECJ issue its judgement in the case C-572 - “ACC Silicones”,

During the year a Ukrainian resident employed by a representative office of a German company in Ukraine has come to Germany and is working remotely for the Ukrainian office.

In the current situation, the relevant measures and sanction lists may change at any time, even at short notice.

On 20 December 2021, the OECD published the model rules on global minimum taxation (“Pillar Two”), on which around 140 countries have agreed as part of the work of the OECD's Inclusive Framework.

In a series of rulings in 2019 and 2020, the German Federal Fiscal Court has abandoned its decades-long ruling practice on implicit group support and the blocking effect of para. 9 OECD Model Tax Convention.

On 29 September 2021, the German Federal Fiscal Court (“BFH”) gave a ruling on the tax legal concept of economic ownership in the context of securities lending.

The new European Regulations on ITGS (regulation (EU) 2019/2152 and the implementing regulation (EU) 2020/1197), finally changing foreign trade statistics reporting, also led to major changes regarding the Intrastat reporting.

There have been several changes to German Transfer Pricing rules in the past months. Read more for additional information.

On 14 July 2021, the “Verwaltungsgrundsätze Verrechnungspreise” (Administrative Principles Transfer Pricing, in the following “administrative principles  2021”) were published.

As reported in #3/2021, in two letters dated 11 May 2021 and 18 June 2021 the German tax authorities have adopted the latest decision of the Federal Fiscal Court regarding warranty commitments granted for remuneration originating from practices in the motor vehicle trade.

The initially planned implementation of the regulations with immediate effect proved to be impossible in practice. Therefore, the tax authorities published a non-objection regulation in an additional circular letter dated 19 August 2021

Addressing the general topic of the tax-legal allocation of securities out on loan, including the perspective of financial accounting.

On 31 August 2021, the German government issued a draft version of an Ordinance on the issuance of funds units as crypto assets.

Following up on the ECJ, also the Federal Fiscal Court had already ruled in 2019 that supervisory board members who only receive a fixed remuneration do not qualify as entrepreneurs within the meaning of the German VAT Act (i.e. “taxable person” as per the VAT Directive 2006/112/EC). The tax authorities have now adopted the case law on remuneration risk with a letter from the Federal Ministry of Finance dated 8 July 2021.

The tax authorities have adopted the latest decision of the Federal Fiscal Court regarding warranty commitments granted for remuneration originating from the practices in the motor vehicle trade.The new rules will be mandatory for all warranty commitments issued after 31 December 2021.

According to a German tax provision dating back to 1925 (Sec. 49 (1) No. 2 lit. f EStG), the mere fact that IP owned by foreigners is either exploited in a German permanent establishment or registered in a German register could trigger non-resident taxation in Germany, even if there is no further nexus in Germany (e.g. none of the affected parties – payer and payee – are German tax residents).

In Germany, the Federal Ministry of Finance has published the Administrative Principles 2020. These replace the version of 2005 to some extent, but there is a greater emphasis on procedural aspects.

WTS Germany shares its view on the recent opinion of European Court of Justice’s Advocate General Kokott in the proceedings C-545/19 - “AEVN”, dated 6 May 2021.

In this article, our tax experts at WTS Germany have summed up the latest developments in the financial services industry in Germany.

German fiscal administration needs to consider the “Danske bank” ruling form the ECJ.

Germany intends to apply modified rules for work deliveries as of July.

Germany’s highest tax court, the Bundesfinanzhof (BFH), has filed a preliminary ruling request to the Court of Justice of the EU (CJEU). The request comprises five questions relating to the concept of “final losses”. 

Germany is narrowing the application of the tour operator margin scheme by partially excluding companies from outside of the EU.

Our WTS Financial Service experts provide information on how the international financial services industry should be prepared for the transformation within German tax law towards more tax transparency and digitalisation.

In Germany, a new fact has been introduced that has led to an obligation for non-residents to file a German income tax return. In the majority of cases, this will cause a considerable additional tax burden in addition to the additional effort of submitting the declaration. It applies as of the 2020 German tax return filing season which should start in 2021.

There is a consultation agreement between France and Germany which should mitigate the tax consequences of home-working days caused by the pandemic.

On 1 October 2020, the Federal Ministry of Finance issued a circular which finally reflects the jurisdiction of the Federal Fiscal Court regarding the definition of work deliveries as of 2013.

An overview of work-from-home tax regulations in Germany during and after the COVID-19 pandemic.

View the full webinar recordings here

To face economic consequences of the Covid-19 pandemic, the standard VAT rate and the reduced VAT rate are adjusted for the period 1 July 2020 until 31 December 2020. 

Typification of the arm’s length principle also applicable to domestic transactions? A comparison of tax consequences in cross-border and domestic cases

An overview on the economic and crisis management package from the German black-red party coalition in response to the consequences of the Corona crisis

An overview of recent decisions of the German Federal Fiscal Court, the final OECD guidance and Germany's bilateral position

In Germany, employees of a foreign permanent establishment (PE) of a Germany-based company are taxable in Germany from day 1.

Measures include deferral, reduction of advance payments and waiver of enforcement measures

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