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01 March 2016

German Government introduces bill to end "dividend stripping" transactions

The German Government introduced a draft of the German Investment Tax Reform Act to the German Bundestag on February 24. The bill comprises, inter alia, a measure intending to shut down trades between foreign (nonresident) and German resident shareholders around the dividend date of the shares, which are set up with the objective to monetize the German withholding tax credit on the distribution (so-called "cum / cum" transactions). To be eligible for a credit of German dividend withholding tax, under the proposal, a German shareholder must now own the shares during a window period of 45 days before and after the dividend distribution date. In addition, the shareholder must bear at least 30% of the risk of a change in value of the shares during that period.

A Tax Alert prepared by Ernst & Young's German Tax Desk in New York, and attached below, provides additional details.

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Document ID: 2016-0412

 

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