Learn how to reclaim German dividend withholding tax, navigate anti-abuse rules, and prepare for MiKaDiv’s 2027 digital overhaul.
Navigating a New Era of German WHT
Germany’s current withholding tax (WHT) landscape is shaped by digital transformation, legislative tightening, and greater transparency. This article explores the evolving framework for reclaiming German WHT on dividends, focusing on the modernized refund procedure, Section 36a of the German Income Tax Act (EStG), and the upcoming digital reporting regime, known as the MiKaDiv initiative. Together, these developments signal Germany’s move toward greater tax transparency and a firm commitment to curbing treaty abuse and financial fraud.
How to Reclaim Dividend Withholding Tax in Germany
Germany applies a statutory withholding tax on dividends at a rate of 25%, plus a 5.5% solidarity surcharge, making the total effective tax rate 26.375%.
While non-resident investors may qualify for a reduced rate under a Double Tax Treaty (DTT) (often 15% or lower), this reduction is generally not applied automatically at the source. Instead, the full tax is withheld, and eligible investors must subsequently apply for a refund of the overpaid amount. The refund mount equals the difference between the statutory rate (26.375%) and the applicable DTT rate.
Step-by-Step Refund Procedure
Confirm Eligibility
To qualify for a refund, the beneficial owner must:
be a resident of a country with a valid DTT with Germany;
meet the conditions specified to qualify for the DTT rate.
Submit the application digitally
Since January 1, 2023, all WHT refund applications must be filed electronically through the BZSt-Online-Portal (BOP), managed by the German Federal Central Tax Office's (BZSt). The portal guides applicants through the mandatory fields and document submissions
Gather supporting documentation
The primary document needed is the Claim for Refund of German Withholding Taxes on Dividends. Applicants must use either the generic form provided by the German tax authorities (GTA) or the country-specific forms (available for countries like the US and Switzerland). The beneficial owner's local tax authority must certify the claim form.
Other necessary documents include:
A valid Certificate of Residence.
Dividend Statements and definitive proof that the WHT was paid.
A Credit Advice detailing payment specifics (gross amount, tax withheld, and payment date).
A Power of Attorney if a third party submits the form.
A German Questionnaire (only required if the beneficial owner is an investment fund).
Demonstrate substance and ownership
The BZSt places high scrutiny on proof of beneficial ownership and economic substance. Investors must prove legal and economic ownership of the shares on the dividend date.
Refund claims for structures – such as shell companies or special purpose vehicles created solely for tax benefits – are likely to be rejected under the "substance over form" principle.
Respect deadlines
The statute of limitations requires refund claims to be submitted within four years from the end of the calendar year in which the dividend was paid.
The Anti-Abuse Cornerstone: EStG §36a and the Cum/Cum Rule
Germany's Section 36a EStG exemplifies its legislative commitment to preventing tax arbitrage. The provision was introduced to curb so-called cum/cum transactions, in which a foreign shareholder (who cannot claim a tax credit) lending or selling their German shares to a domestic person (which can claim a tax credit) just before the dividend record date. The domestic entity would collect the dividend, benefit from a tax offset, and then transfer the shares back to the foreign party, splitting the tax advantage between both parties.
This practice, while different from the more notorious cum/ex schemes (which involved fraudulent, multiple refund claims on a single WHT payment), circumvented domestic dividend taxation and led to a loss of state revenue. Introduced in 2016 with retroactive effect, Section 36a was a direct and forceful legislative response to close this systemic loophole.
The Stringent Conditions for WHT Relief
To claim WHT relief under EStG §36a, investors must satisfy two key conditions:
45-day holding period test
Requires the claimant to have "continuous economic ownership" of the shares for at least 45 consecutive days within a 91-day window surrounding the dividend ex-date (45 days before to 45 days after the dividend due/ex-date).
The law specifically focuses on "economic ownership" rather than civil law ownership, a distinction that prioritizes the substance of a transaction over its legal form.
70% economic risk
The claimant must bear at least 70% of the market risk of the shares during the minimum holding period. This provision is designed to defeat transactions that utilize hedging instruments, such as put options, repos, or other opposing claims to minimize market exposure.
If a claimant's risk is reduced by more than 30%, the condition is not met, and the WHT credit or refund is denied.
Exceptions
De Minimis Exception
The restriction on imputation does not apply if the total investment income for the year is less than €20,000.
Long-Term Holding Exception
The restriction also does not apply if the taxpayer has been the uninterrupted beneficial owner of the shares for at least one year at the time the dividend is received.
Table 1. Section 36a EStG – Key Conditions and Exceptions for WHT Relief
| Condition | Description |
| 45-Day Holding Period | Shares must be held with continuous economic ownership for at least 45 consecutive days within a 91-day window around the dividend ex-date. |
| 70% Economic Risk | The investor must bear ≥70% of market risk during the holding period; excessive hedging or similar risk mitigation invalidates eligibility. |
| Exception | Description |
| De Minimis Exception | Rule does not apply if annual investment income is below €20,000. |
| Long-Term Holding Exception | Exemption applies if the investor has been the beneficial owner for ≥1 year at the dividend date. |
The MiKaDiv Initiative: A New Digital Reporting Regime
The Purpose and Objectives
MiKaDiv, or Mitteilungsverfahren Kapitalerträge Dividenden, is a mandatory digital reporting procedure for investment income that aims to replace traditional, paper-based tax certificates with a standardized, automated system.
Its primary objectives are to:
streamline and modernize WHT reporting,
reduce the potential for tax fraud and abuse,
enhance transparency throughout the securities custody chain.
The initiative emerged as a regulatory response to the Cum/Ex scandal, designed to prevent such schemes from occurring in the future by tracking the custody chain and transaction timing.
Implementation Timeline and Requirements
The MiKaDiv regime will be effective from January 1, 2027, applying to all income payments made after December 31, 2026.
Under the new framework, the burden of data reporting shifts from the individual investor to financial institutions. German custodian banks, paying agents, and foreign financial institutions will be required to submit detailed digital reports directly to the BZSt, including:
Beneficial owner details to identify the true investor.
The full custody chain with all intermediaries identified via Legal Entity Identifiers (LEI).
Detailed securities and income information, including ISINs, dividend amounts, and payment dates.
A complete record of transaction activity around the dividend event, including details on any financial arrangements.
Once these comprehensive reports are submitted and accepted, the BZSt will generate a Universally Unique Identifier (UUID) – a critical prerequisite for any future WHT reclaim, effectively replacing the traditional paper tax certificate. Without a valid UUID, investors will be unable to access tax relief.
This data-driven model represents a significant paradigm shift from manual, case-by-case reviews to proactive digital oversight. By mandating a digital report that includes the entire custody chain and transaction history, the German authorities can immediately identify suspicious trading patterns around the dividend date, significantly reducing tax fraud risk and administrative workload.
Importantly, MiKaDiv is closely aligned with the broader EU FASTER initiative, which aims to streamline and digitize tax relief across member states, advancing a unified European front against cross-border tax fraud.
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In conclusion
Germany’s dividend withholding tax system is evolving towards digitalization, greater transparency, and substance-based compliance. Navigating this landscape successfully requires thorough documentation, timely filings, and demonstrable economic ownership.
For institutional investors and financial intermediaries, proactive adaptation to the MiKaDiv regime and compliance with Section 36a EStG will be essential to secure legitimate WHT relief in the years ahead.
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