On 3 April 2017, the BMF issued a comprehensive Application issues of the new § 36a EStG position. This provision, which was introduced with the Investment Tax Reform Act, restricts the creditability of capital gains tax for certain share purchases and dividend receipts around the dividend record date (so-called cum/cum situations).

From the legislator's point of view, the need for regulation arose from the following transactions, which were common practice on a large scale for many years: A shareholder resident abroad - who is not entitled to offset - sells or lends his German shares before the dividend record date, e.g. to a domestic bank. The bank collects the dividend, can offset the withheld capital gains tax and transfers the shares, including the dividend, back to the seller after the dividend record date; the tax benefit is split between the parties involved. As a result, domestic dividend taxation could be circumvented. Systematically, the incentive for such arrangements was based on the unequal treatment of dividends and capital gains.

The provision of Section 36a EStG applies retrospectively from 1 January 2016. Accordingly, the full crediting of capital gains tax is only possible if the taxpayer is subject to capital gains tax during a tax period.

  • Minimum holding period of 45 days (within a period of 45 days before and 45 days after maturity of the capital gains)
  • was the uninterrupted beneficial owner of the shares and
  • bears at least 70% of the risk of change in value, and
  • is not obliged to remunerate the investment income to other persons.

However, the restriction on imputation does not apply if the relevant investment income does not exceed € 20,000 or the taxpayer has been the beneficial owner of the shares for at least one year without interruption at the time of the dividend inflow (Section 36a (5) EStG).

Insofar as harmful cum/cum transactions are identified, these must either be taken into account by the taxpayer in the tax return or reported separately to the competent tax office; this obligation can in principle apply to any domestic taxpayer - private investors, partnerships and corporations - with corresponding imputation amounts.

Pursuant to Section 36a (4) EStG, previously tax-exempt companies in particular are included in a separate reporting obligation. Domestic investment fundswhereby only the years 2016 and 2017 are relevant here. Thereafter, a definitive corporation tax of 15% applies to public investment funds anyway, which makes the imputation limit unnecessary. For the 2016 financial year and for financial years ending before 30 June 2017, the relevant cum/cum transactions must be reported by 30 June 2017. If the analysis of the critical transactions within the meaning of sec. § 36a EStG has not yet been completed by then, an extension of the deadline should be applied for in good time. The notification constitutes a tax return and is subject to review.

Depending on the amount of tax declared or to be declared, legal remedies should be considered, as the provisions of Section 36a EStG are very likely to violate higher-ranking law.