The German Tax Authorities (GTA; Bundeszentralamt für Steuern (BZSt)) have confirmed that their new electronic filing procedure will become mandatory for exemption certificate applications and withholding tax (WHT) reclaims as of 1 July 2023. This new electronic filing procedure (BZSt OnlinePortal (BOP)) will replace the previous process of submitting hardcopy paper-based applications. Although the introduction of the BOP was effective as of 1 January 2023, and mandatory as of July 2023, the GTA confirmed that hard-paper reclaim applications are still permissible until 30 September 2023, for expiring reclaims only. The BOP must therefore be used from the respective effective dates for any investor (or their representative) submitting tax reclaim applications to the GTA seeking tax relief on German income, irrespective of the applicable dividend year.
The BOP is applicable to Double Taxation Treaty WHT reclaims, as well as exemption certificate applications. European Court of Justice (ECJ) and German Investment Tax Act (GITA) reclaims will likely continue to follow the previous, paper-based process. Additionally, the BOP is currently not available for Swiss domiciled applicants due to the Mutual Agreement of January 26, 1972, which is still in effect and pending amendment. The Mutual Agreement provides for specific claim forms to be completed by Swiss applicants filing German Tax Relief claims (and vice versa), and the required claim forms are yet to be available in an automated state.
Usage of the BOP requires the applicant (or their representative) to register with the GTA; a multi-step process that requires passwords and activation codes to be sent via electronic and physical mailing systems. Scanned copies of wet-ink-signed tax forms will be accepted under the BOP submission mechanism, where previously original signed documents were required (electronic signatures are still not accepted). Further advancements include that tax forms are no longer required to be certified by foreign tax authorities as applicants may now submit a certificate of residency (CoR) issued by the foreign tax authorities via the BOP.
Factors to Consider in the Current Usage of BOP
Whilst the digitisation of the WHT relief and reclaim process is a welcomed step-forward for the industry and aligns with the EU Commission’s Consultation on Cross-Border Investment and Simplified Taxation across its member states, the BOP in its current state carries challenges that have been voiced by the industry.
Each individual BOP user is required to register themselves under the GTA Portal which removes a single, streamlined process within organisations. The BOP does not allow multi and simultaneous reclaim submission uploads which, considering the volume of WHT reclaim submissions annually, significantly increases the risk of error and the need for resources, therefore impacting efficiency and cost. Additional constraints include the BOP being made available only in German, further increasing the risk of error for foreign BOP users, as well as a significant level of manual input requirements.
Continuity in German Tax Reclaim Filings: WTax’s Stance on the Introduction of the BOP
As a tax-technology led company, we are able, and continue to service our clients with reclaim filings in this market. Our strategic and technological capabilities allow us to smoothly navigate through the challenges presented by the BOP, in addition to our tax-technical expertise and horizon scanning initiatives that keep us abreast of any tax regulation and filing procedure changes, enabling WTax to anticipate changes and proactively respond with agility.
In light of this, WTax can offer end-investors holding German investments an end-to-end tax reclaim submission and query management service without interruption in the German market, thereby eliminating the likelihood of significantly delayed future German WHT submissions, as well as the risk of future reclaims reaching their statute of limitations resulting from backlogs.
WTax can support Custodian Banks with the German reclaim submission process to ensure the continuation of positive client experience and minimising high volume backlog. Such support can be provided through an operating model of the Custodian’s choice, such as a “letterbox” functionality whereby WTax uses technology submission processes to submit reclaims prepared by the Custodian. Alternatively, WTax has the breadth of tax-technical know-how and resource capacity to provide an end-to-end processing, submission, and query management service for Custodian Banks in the German market across their client base, in a white-labelled manner.
Whether you are a financial intermediary or an investor, please get in contact to discuss the tax impact of you or your clients’ investments and solution requirements at WTaxCustodianTaxProducts@wtax.co