The tax deposit account with foreign corporations: Here there are special features in the separate determination of the deposit account, in the capital repayment and capital reduction as well as, of course, in the liquidation. Using the example of Great Britain, we present the differences in the tax deposit account with EU subsidiaries (UK-Limited before Brexit) and third-country subsidiaries (UK-Limited after Brexit).

1. repayment of capital from the tax deposit account within the European Union

1.1. generally no tax-neutral capital repayment for foreign subsidiaries

A capital repayment is not counted among the tax revenues, provided this according to § 20 para. 3 EStG from the tax deposit account within the meaning of § 27 Corporate Tax Act (KStG). A corporation which is not taxable without restriction in Germany does not have to maintain a tax deposit account, since § 27 Abs. 1 S. 1 KStG only applies to unlimited taxable companies. [] 6]

A foreign subsidiary therefore does not have a tax deposit account and cannot in principle make a tax-neutral capital repayment.

The exclusion of a tax-neutral capital repayment violates European law,[7] so that the legislature with § 27 para. 8 KStG has closed the regulatory gap. The deposit guarantee is in accordance with § 27 Abs. 8 p. 2 KStG in accordance with paragraphs 1 to 6 of § 27 KStG and §§ 28, 29 KStG. [8] The German legal principles for the repayment of deposits must be applied. [9] Effective in the application of § 27 Abs. 8 KStG for the tax-neutral deposit guarantee also for foreign corporations a tax deposit account can be kept.

2.Repayment of capital from the tax deposit account outside the European Union (third countries)

2.1. No tax-neutral capital repayment for third country corporations

§ 27 para. 8 KStG applies according to sentence 1 half sentence 2 only to member states of the European Union, after the completed Brexit the regulation for tax-neutral capital repayment no longer applies to the UK.

Repayment of capital from a third country would be contrary to the free movement of capital provided for in Article 63 TFEU in the event of attribution as taxable income[10], since direct investment is also covered by the free movement of capital. [11] Due to the inapplicability of § 27 para 8 KStG, a return of deposits can thus be made for a third country even without a tax deposit account. [] 12]

2.2. Current legal uncertainties about the tax deposit account

Legally unclear is what can be regarded as revenue within the meaning of § 27 KStG. It is undeniable that there must be no distributable profits in order to make a tax-neutral repayment of the capital. [13] The company’s prepared balance sheet can be used for the repayment of deposits, even if it is prepared under foreign law, with the burden of proof on the taxpayer. [] 14]

3rd Conclusion

After Brexit, a repayment of the capital can be tax-neutral, but the legal requirements have not yet been fully clarified. [15] The continuation of a tax deposit account is advisable.