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Impacts of German Investment Tax Act 2018 on the clearing of securities lending and repo transactions

Release date: 05 Dec 2018 | Eurex Clearing

No. 104/18 Impacts of German Investment Tax Act 2018 on the clearing of securities lending and repo transactions

On 15 May 2018, the German Federal Ministry of Finance (Bundesministerium für Finanzen, BMF) published a circular on the application of the German Investment Tax Act 2018 (“Investmentsteuergesetz; InvStG”). This BMF circular provided further clarification on withholding tax obligations in securities lending and repo transactions with German equity underlyings, in case one of the counterparties is an investment fund in meaning of the InvStG.

According to the BMF circular, Eurex Clearing in its role as central counterparty (CCP) will not be obliged to deduct German withholding tax on income derived from securities lending and repo transactions.

As of 1 January 2019, Eurex Clearing will disclose the original counterparties to the securities lending transaction in its clearing reports (“Abrechnungsunterlagen”), 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.

In addition, 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.

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