Dividend withholding taxes paid by investment funds prior to 2018 should be refunded, according to a milestone decision of the German Federal Fiscal Court.
Handing down its judgement on two test cases brought by KPMG, the court ruled that the claimants, a Luxembourg SICAV fund and a French FCP fund, are entitled to a refund claim based on the free movement of capital.
The court found that German legislation was discriminatory as Section 11 of the German Investment Tax Act exempts German funds from tax on German dividend income for the dividend years 2004 to 2017, while foreign funds had to pay a withholding of at least 15% on German source dividends.
The court concluded that the general German limitation period of four years after the end of the year in which the dividend was received, or the dividend withholding tax was paid, applies.
The court awarded late interest of 0.5% per month to the foreign investment funds.
