Fund Taxation Alert 2025-08

The Federal Tax Office (BZSt) has begun processing withholding tax (WHT) refund claims following the landmark ruling by the German Federal Fiscal Court (BFH) in the KPMG tax cases (IR 01/20, IR 02/20). While the Hessian Tax Court’s final decision is still pending, important developments have occurred.

In June 2025, the first refunds for Luxembourg-based Fonds Communs de Placement (FCP) were issued.

Alongside Luxembourg SICAVs, Luxembourg FCPs are now receiving partial WHT refunds. However, the refunds currently amount to only 15% of the claimed WHT rate of 26.375%. This limited refund is likely based on the argument that the fund could have requested relief under the Double Taxation Agreement (DTA).

The Luxembourg FCP could theoretically benefit from the DTA between Luxembourg and Germany for investors resident in Luxembourg (so-called “quota arrangement”), according to the amendment protocol dated April 23, 2012 (applicable from 2014). However, for public funds with many investors, often investing via nominee accounts where investor identities are not disclosed, it is practically impossible to utilize this DTA relief. Moreover, the BFH ruling emphasizes the “fund level” perspective rather than an “investor level” view.

Consequently, there should be strong arguments against the tax authority’s approach. In particular, it is crucial to prevent the authority from establishing legal finality through a partial refund decision, which requires filing an administrative recourse within one month.

• The BZSt has also taken the position that interest on refunded amounts may not be paid retroactively if the refund application was incomplete at submission. Interest would only begin accruing once all required documents and information are fully provided. This stance could significantly delay or reduce interest payments.
  
• We strongly disagree with this interpretation, as it contradicts the BFH ruling’s intent.
  
• According to the BFH ruling, the right to interest arises from EU law, and any conflicting national interest provisions violate the EU principle of effectiveness. Moreover, as the wrongfully withheld tax amount was unavailable to the taxpayer during this period, a liquidity disadvantage arose that must be adequately compensated through interest payments. Finally, one should bear in mind that the documentary requirements are still incoherently applied by BZSt and were not known at the moment of the filing of the WHT reclaim. 

KPMG strongly recommends filing appeals against any partial rejections of FCP refund claims within the one-month deadline following receipt of the decision. It is essential to observe this deadline and submit appeals promptly. To assist with deadline monitoring, KPMG has established a service to receive all decisions under a power of attorney (PoA), ensuring that timely action can be taken before any adverse decision becomes final.

The funds are also advised to claim applicable interest and, if necessary, appeal against any denial of interest payments.

If you have any questions or need assistance with your claims, assessment of refund decisions, or filing of appeals, please do not hesitate to contact us.

For more details on the BFH judgment in the KPMG tax cases (IR 01/20, IR 02/20), please see our previous KPMG Alert here .