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DE - German taxability of income on securities lending and repo transactions

25/09/2018

15 May 2018 the German Ministry of Finance issued a circular letter giving some guidance with respect to the newly introduced taxation of income from securities lending/repos on investment fund level.

15 May 2018 the German Ministry of Finance issued a circular letter giving some guidance with respect to the newly introduced taxation of income from securities lending/repos on investment fund level.  Under the new Investment Fund Tax Regime (“GITA”) in force since 1 January 2018, German and non-German investment funds are subject to German corporate tax to the extent that they generate income from German equities as lender. The borrower shall be obliged to withhold German tax. This taxable income does not only include dividend income, but—in order to prevent tax avoiding schemes on German sourced dividend income—also all income in connection with securities lending/ real repo transactions on German equity.

According to the circular letter all income in the context of securities lending/real repo transactions on German equity is subject to corporate taxation on the level of an investment fund:  Manufactured dividends, Lending fee, income from securities serving as collaterals. But the income mentioned above is only subject to taxation if the securities lending/real repo transaction period includes the relevant dividend record date.

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