Fund Taxation Alert 2025-03
Federal Central Tax Office – New developments on the reimbursement process
Federal Central Tax Office – New developments on the reimbursement process
Current Stage
While the final decision of the Hessian Tax Court is anticipated in the coming months, the Federal Tax Office (“BZSt”) has already started to refund WHT reclaims based on the judgement of KPMG tax case (IR 01/20, IR 02/20) of the German Federal Fiscal Court (“BFH”). However, from our experience and observations, these WHT refunds are covering lower amounts on dividend payment years before 2012.
Currently, the KPMG tax case was referred back to the Hessian Tax Court to carry out the review of the dividend payments and the calculation of interest to conclude the proceedings.
For further details on the judgement of KPMG test cases (IR 01/20, IR 02/20) of the BFH, please check our previous KPMG Alert here.
Next step: Fast-Track-Procedure
For investment funds with the legal form of a Luxembourg investment company with variable capital (i.e. a ‘SICAV’) or a French “Fonds commune de placement” (“FCP”), KPMG is in contact with the German tax authorities to process ‘simple cases’ at an early stage to fast track the process. These cases could be considered as ‘simple cases’, as these legal forms have been decided by the judgement of the BFH. This procedure should be applicable to all reclaim years until 2017 (included).
Based on our experience of the KPMG test case, along with the ongoing discussions with the German competent authorities, , this ‘Fast-Track-Procedure’ could be viable in cases where required documentation is complete and evidence of legal succession/beneficial ownership etc. is proven.
Therefore, under this procedure, there is a clear advantage that can be obtained where funds might benefit from the early refund decisions from the German Central Tax Office.
The current expectation is that the processing of several thousand WHT reclaims (currently pending at the level of the German tax authorities), could probably take several years until the refunds are finally granted.
Recommendation:
Where a ‘simple case’ is identified, we recommend reaching out to KPMG to launch a ‘Fast-Track Procedure’, so that your funds can benefit from the early processing, the result of which might be a cash benefit for your managed funds, provided that all the conditions be met and a refund payment is granted.
Furthermore, as the German tax authorities started to send information requests or even assessment notices (i.e. Bescheid) on refund decisions in some cases, it is crucial to carefully review any request/decision received, and to file an objection letter if the reclaimed amount is not fully reimbursed or in case of (partial) rejection.
Under such a scenario, the timeline to file an objection is only one month.
Our continued recommendation is to put in place a Power of Attorney, appointing a German tax advisor to monitor and review all letters received from the German tax authorities.
We will continue to monitor any evolution of the cases, especially the pending decision of the Hessian Tax Court, and update you once further details are available.
Should you have any questions or comments on the ‘Fast-Track-Procedure’, or other points in relation to the KPMG tax case, do not hesitate to contact us.
