Eurex changes up clearing reporting as part of GITA
07 December 2018 Frankfurt
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Eurex Clearing will disclose the original counterparties to the securities lending transaction in its clearing reports, effective 1 January 2019, as part of the German Investment Tax Act 2018.
This will be done whenever the clearing member lender is an investment fund and/or a capital management company acting on behalf of an investment fund in the meaning of section 1 paragraph 2 InvStG.
Additionally, Eurex Clearing will inform in its clearing reports that the obligation for German withholding tax deduction remains with the original borrower.
Clearing members acting as investment funds or acting as capital management companies on behalf of investment funds will not be eligible for clearing of German equities in repo transactions.
On 15 May this year, the German Federal Ministry of Finance (Bundesministerium für Finanzen, BMF) published a circular on the application of the German Investment Tax Act 2018.
This BMF circular provided further clarification on withholding tax obligations in securities lending and repo transactions with Germany equity underlying, in case one of the counterparties is an investment fund in the meaning of the InvStG.
On 1 January 2018, the German Investment Tax Act (GITA 2018), which among other things introduced the taxation of manufactured dividends and lending fees on German equities.
Under this new regulation, German-sourced income, including revenue from securities lending and repo, became taxable at 15 percent withholding tax for non-resident funds, while some 15 percent corporate tax was also imposed on German resident funds.
Payment of the withholding taxes on German-sourced dividends by non-German resident funds discharged the corporate tax at fund level, in order to ensure no double taxation takes place.
This will be done whenever the clearing member lender is an investment fund and/or a capital management company acting on behalf of an investment fund in the meaning of section 1 paragraph 2 InvStG.
Additionally, Eurex Clearing will inform in its clearing reports that the obligation for German withholding tax deduction remains with the original borrower.
Clearing members acting as investment funds or acting as capital management companies on behalf of investment funds will not be eligible for clearing of German equities in repo transactions.
On 15 May this year, the German Federal Ministry of Finance (Bundesministerium für Finanzen, BMF) published a circular on the application of the German Investment Tax Act 2018.
This BMF circular provided further clarification on withholding tax obligations in securities lending and repo transactions with Germany equity underlying, in case one of the counterparties is an investment fund in the meaning of the InvStG.
On 1 January 2018, the German Investment Tax Act (GITA 2018), which among other things introduced the taxation of manufactured dividends and lending fees on German equities.
Under this new regulation, German-sourced income, including revenue from securities lending and repo, became taxable at 15 percent withholding tax for non-resident funds, while some 15 percent corporate tax was also imposed on German resident funds.
Payment of the withholding taxes on German-sourced dividends by non-German resident funds discharged the corporate tax at fund level, in order to ensure no double taxation takes place.
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