Germany: Guidance on repayments of contributions by non-EU corporations

Guidance regarding repayments of contributions by corporations domiciled in non-EU countries

Guidance on repayments of contributions by non-EU corporations

The German Federal Ministry of Finance (BMF) issued guidance regarding repayments of contributions by corporations domiciled in non-EU countries. Such guidance is applicable to all open cases. 


Under German law, repaid contributions are exempt from tax for shareholders. By contrast, depending on the legal form of the shareholder, dividends are subject, at least in part, to taxation.

Corporations domiciled in another EU Member State may also make tax-exempt repayments of contribution to German shareholders. The requirement for this is an application within a set period by the foreign corporation for separate assessment of the amount of repayment of contribution (Section 27 (8) of the German Corporation Tax Act [KStG]). However, to date there has been no conclusive guidance regarding whether a corporation domiciled in a non-EU country may also make a tax-exempt repayment of contribution. 


Under the guidance, non-EU corporations may make tax-exempt repayments of contribution so long as the repayment is of nominal capital and the presence of a nominal capital repayment can be substantiated using suitable documents (in particular the resolution on the nominal capital reduction and repayment).

However, if the foreign corporation reduces its capital within five years of issuing new share rights and repays in part or in full the funds made available through this, the repaid amounts are deemed dividends for shareholders to the extent they do not exceed the amount of the capital increase.

The amount of the distributable profit, the subscribed capital and the contributions not made to nominal capital (e.g., capital reserve) are to be derived from the foreign balance sheet which precedes the year of payment to the shareholders. A repayment of contribution may only be tax-exempt if it exceeds the distributable profit of the foreign company.

For a repayment of contribution to be assessed, the shareholder must submit the following information and documents in German: Domicile of the distributing corporation in a third country for the requested period, amount of the investment of the domestic shareholder, resolutions and substantiation of the distribution paid as well as its foreign balance sheet.

For corporations domiciled in a European Economic Area (EEA) country, the relevant provisions for corporations domiciled in an EU Member State generally apply. However, the provisions described for non-EU corporations also apply for EEA corporations if such corporations fail to make an application within the set time period.

Read a June 2022 report [PDF 1.2 MB] prepared by the KPMG member firm in Germany 


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