date | theme

25. November 2018 | Taxation of profit distributions from GmbH

17. January 2020 | GmbH shareholders: Managing Director salary or profit distribution?

17. June 2020 | Tax-free distribution of profits to a holding company based abroad

8. July 2021 | Repayment of hidden profit distribution – tax treatment

15. June 2022 | Crediting of capital gains tax to income tax according to § 36 II No. 2 EStG (this contribution)

The capital gains tax previously retained by the entity paying out the capital gains can be credited under the conditions of § 36 EStG. Investment income within the meaning of § 20 EStG is, for example, income from investments in corporations. We explain when the capital gains tax is applied.

We clarify the difference between capital gains tax and partial income proceedings for investments in corporations.

The allocation of capital gains tax to income tax is regulated in § 36 EStG. The legislature thus follows the principle that the tax that a third party has paid in advance for the taxpayer should be counted towards the assessment. This should avoid a double tax burden on income. According to § 43 (1) sentence 1 EStG, the capital gains tax is the income tax of the taxpayer, which is withheld by tax deduction at source according to § 43 following EStG. Therefore, the capital gains tax is already levied when the capital gains are generated.

Investment income in this sense is the income listed in § 20 (1), (2) EStG. This includes, for example, dividends, profit distributions and corresponding sales income. In summary, § 20(1) EStG can be divided into shareholding income and remuneration for the temporary transfer of capital. However, the capital gains tax is only subject to the capital gains paid by a debtor with residence, management or registered office in Germany (§ 43 (3) sentence 1 EStG).

In the case of tax crediting, the tax to be paid is reduced by the tax already paid. If, accordingly, more is paid than actually has to be paid after the assessment, there is a tax refund. Otherwise, the tax repayment is required.

Since two cases in particular have proven to be abusive within the scope of the capital gains tax, these are specially regulated. As part of the Cum/Ex transactions, capital gains tax is refunded several times through short sales of shares, even though it was paid only once.

Cum/Cum transactions are those in which non-eligible shareholders transfer the shares held to eligible shareholders shortly before the dividend date in order to offset capital gains tax. The capital gains tax is generally credited to the owner, i.e. the acquirer of the share. However, if the beneficial owner deviates from the actual owner, the crediting shall in principle take place with the beneficial owner. The decisive factor is § 36a EStG. Accordingly, the entitlement of the actual owner to account should only apply if the acquirer complies with a minimum holding period of 45 days before and 45 days after the maturity of the investment income. In the absence of these conditions, 3/5 of the capital gains are not recognised by the acquirer, since the seller remains the beneficial owner.

In order for the tax credit to be possible, some conditions must be met. The crediting requires, for example, the retention of capital gains tax by the person liable for the deduction. Whether the withholding was lawful, however, does not matter. In addition, the taxpayer can also count if the deductible has withheld the tax but has not paid it to the tax office. Otherwise, there will be an unjustified risk shift to the taxpayer, although the tax authorities must be able to impute the risk of non-payment. The reason for this is that, for reasons of simplification, he has made use of a tax-deferred post, when the tax withholding is actually his business. The capital gains tax is therefore not eligible on its own if the taxpayer was aware of the non-payment and did not take any countermeasures.

The withholding of the tax on capital gains has, in accordance with § 43 paragraph 5 sentence 1 half sentence 1 EStG, in principle a valid effect, so that the income is no longer assessed. Therefore, they are in principle excluded from a tax assessment. Something else can therefore only apply if the law makes an exception to this principle. The latter applies if the shareholder requests a favourable examination, the partial income procedure applies. A further exception to the principle of compensation applies to holding companies within the scope of the tax exemption pursuant to § 8b KStG for box holdings.

The problem could be that in the context of the partial income procedure according to § 3 no. 40 EStG 40 % of the capital income is tax-free. However, since the capital gains tax retention according to § 43 (1) sentence 3 refers to the entire income, the tax-exempt part of the dividend is also included. Therefore, the tax exemption is only achieved by offsetting the total capital gains tax withheld. The same therefore also applies to the earnings of a holding company under §8b KStG as part of a box participation. Of course, the retention of the capital gains tax initially creates a liquidity disadvantage. However, how you can easily avoid this with the application for permanent overcoats according to § 44a V EStG, we explain in this article and in our following video. If you would like to submit this application for permanent swabs, we will gladly provide you with the corresponding form below.

We clarify how you avoid the liquidity disadvantage of a holding company from the payment of capital gains tax.

In addition, crediting is excluded if the refund has been requested or carried out. Under the capital gains tax, EStG reimbursement can be requested pursuant to § 44b or § 44a(9), first sentence. Whether the reimbursement was made is an economic assessment. It is therefore irrelevant whether the refund was made rightly or wrongly. Credit may nevertheless be granted if the claim for reimbursement has been rejected by final decision.

The taxable person bears the burden of establishing the deductible tax. Therefore, the taxpayer must present the capital gains tax certificate. The submission is therefore a prerequisite for credit. However, if the certificate is revoked or returned, the crediting shall not be omitted. On the contrary, the condition of presentation of the certificate was still fulfilled. If, on the other hand, the taxable person requests the favourable examination, it is sufficient if he presents the certificate at the request of the tax office. The crediting shall be made in the investment period in which the income is recognised.

If the tax withholding has no effect on your capital gains, you must necessarily count the capital gains tax. In order not to suffer a liquidity disadvantage, you should still remember to make the application for permanent overpayers. But beware: As a rule, other operations of a holding company are harmful. We are happy to check for you whether the application is suitable for your shares and how you tax them optimally.