Applying for a separate tax refund of capital contributions

Payments made by a foreign corporation or association of persons without a registered office or management in Germany may be tax-free for its German shareholders.

Foreign corporations or partnerships are not obliged to maintain a tax deposit account. If the foreign corporation or partnership makes payments such as

• payments of profit shares (dividends) or other remuneration from
  • shares,
  • profit participation rights,
  • shares in limited liability companies or economically comparable benefits (non-exhaustive list),

to domestic shareholders, it is possible to apply for a separate determination of a non-taxable repayment of capital contributions.

The subject of the determination is all payments made by the applicant from their notional tax contribution account.

When submitting the application, not only the contributions and payments made by domestic shareholders must be stated, but in principle all contributions and payments. The obligation to provide evidence begins from the point in time at which the contributions whose repayment is being claimed were made.

The application must be submitted using the officially prescribed form to the tax authority that is locally responsible for taxing the applicant's income at the time the application is submitted. If no tax authority has local jurisdiction at the time the application is submitted, the application must be submitted to the Federal Central Tax Office (BZSt).

Important note:

Foreign investment funds that make certain payments to their domestic shareholders, such as

• certain distributions by the investment fund,
• Advance lump sums,
• profits from the sale of investment units,
• distributed income,
• income equivalent to distributions and
• gains from the sale of special investment units,

can no longer apply for a separate determination of a repayment of capital under the German Corporation Tax Act from the 2018 tax year.

When applying for the repayment of deposits, you must submit

• Information on the applicant's limited corporation tax liability in Germany, stating assets and activities in Germany for examination by the competent authority at the local tax authority or the Federal Central Tax Office (BZSt)
• current extract from the commercial register
• a company overview showing how the individual companies were established and how they are linked to each other: the overview must show how long the individual companies have existed (e.g. in the form of an organizational chart)
• Amount of the share held by the domestic shareholder
• If applicable, power of representation in accordance with Section 80 of the German Fiscal Code (AO) and power of attorney to receive
• own development of the various components of equity from the date on which contributions were made, the repayment of which is claimed, at the earliest since January 1, 1977
• a calculation of the repayment of contributions
• Annual financial statements with reconciliations to German tax law in analogous application of Section 60 of the Income Tax Implementation Ordinance (EStDV) from the period from which contributions were made, the repayment of which is claimed, at the earliest since January 1, 2006
• Resolutions and evidence of the actual implementation of
  • Contributions whose repayment is claimed, at the earliest since 1.1.1977
  • Benefits for the assessment period applied for
  • Changes in nominal capital from the period from which contributions were made, the repayment of which is claimed, at the earliest since January 1, 1977
  • Conversions from the period from which contributions were made, the repayment of which is claimed, at the earliest since 1.1.1977

Notes:

• You must provide evidence of the amount and actual execution of cash contributions and cash payments by submitting account statements (bank statements showing the payer and payee).
• In the case of contributions in kind and payments in kind, you must provide evidence by submitting contractual documents (e.g. transfer, loan or merger agreement) and accounting records.
• To determine the value of contributions in kind and contributions in kind (shares, receivables or other assets), you must provide evidence, for example in the form of a valuation report.
• Contributions and benefits that are not documented cannot be taken into account.

Applications for tax refund of deposits can be made by

• foreign
  • corporations or
  • associations of persons,

that are not subject to unlimited tax liability in Germany if they can grant certain benefits, in particular profit shares such as dividends or other payments from shares and profit participation rights and comparable benefits.

• Appeal
• Action before the tax court

You must submit the application for a separate determination of a repayment of capital using the officially prescribed form to the local tax authority or the Federal Central Tax Office (BZSt).

Option 1: You must submit the application in writing or electronically via the My ELSTER portal to the tax authority that is locally responsible for taxing the applicant's income at the time the application is submitted.

Option 2: If no tax authority is responsible for the applicant at the time the application is submitted, you must submit the application in writing or online to the Federal Central Tax Office (BZSt).

If you wish to submit the application online, the corresponding application form is available for electronic submission in the BZSt online portal and in the My ELSTER portal.

If you wish to submit your application on paper, please download the application form from the Federal Tax Administration's forms management system (BFINV) and complete it.

• Print out the completed application form. The application form must then be signed by
  • a legal representative of the company or their authorized representative
  • their authorized representative.
• Send the signed application form together with the other required documents by post, depending on the jurisdiction, to
  • the locally competent tax authority (option 1) or
  • the office of the Federal Central Tax Office (BZSt) in Berlin (option 2).
• The local tax authority (option 1) or the BZSt (option 2) will check your application. You may have to answer further questions or submit additional documents.
• If the application is approved
  • the competent local tax authority (option 1) or
  • the BZSt (variant 2)

issues a notice on the separate determination of tax bases in accordance with Section 27 (8) sentence 3 KStG and sends it by post to the address given in the application form.

• In the event of a rejection, you will receive a notice of rejection by post.

Application: by the end of the twelfth month following the end of the financial year in which the benefit was paid (cut-off period).

There are no costs.

There are no indications or special features.