Germany centralizes the filing and processing of ECJ withholding tax reclaims.

On May, 28th the German Parliament accepted a proposal to centralize the filing of ECJ dividend  tax reclaims (ECJ reclaims or Fokus Bank claims are common names for withholding tax reclaims based on the free movement of capital in the EU treaty). The proposal had been tabled serveral times before over the past years but has now finally been accepted.

ECJ reclaims of dividend withholding tax can be feasible when the applicable double tax treaty between Germany and the foreign investor's residence country does not exempt or refund dividend withholding tax. Important conditions for such a claim are that the foreign investor is objectively comparable to its German peers which, unlike the foreign investor, are entitled to full exemption or refund under German tax law.

Until today, there were no rules in Germany as to which tax administration was competent or responsible for processing ECJ based dividend withholding tax reclaims. As a result, foreign investors seeking to reclaim German dividend withholding tax on the basis of free movement of capital had to file every claim on three levels. Or at least they should have, if they wanted to minimize or eliminate the risk of such claims being rejected as inadmissible. Or as not filed with the competent tax office. They had to file with the federal tax office, with the local tax office where the Germany company paying the dividend resided, and with the tax office where the foreign investor held its most valuable investment. The latter means filing with the local tax office where the German dividend paying company resides that makes up for the largest share investment of the claimant, as compared to the claimants investments in other German companies. For foreign large (institutional) investors, this practice meant that they had to file their claim with dozens of different tax offices

As of today, it is clear that the federal tax administration is responsible for processing these ECJ reclaims. So now, foreign investors can file their claim with the federal tax office only, which will save an enormous amount of time and effort. The new centralized filing procedure is said to have immediate effect, meaning that claims timely filed in the past that have not yet been processed will now be handled by the federal tax administration.

Would you like to learn more about the possibility to reclaim German dividend withholding tax based on the free movement of capital? Please send your request to [email protected]