TaxTrail: MiKaDiv Reporting – Compliant reporting along the custody chain for German tax certificates

The new notification procedure Capital Gains Tax on Dividends and Depositary Receipts (MiKaDiv), which will be introduced on January 1, 2025, brings fundamental changes for the creation of German tax certificates. This has an impact on all German financial institutions as well as banks worldwide that trade or hold German shares.   

The changes are related to the Act on the Modernisation of the Relief of Withholding Taxes and the Certification of Capital Gains Taxes (AbzStEntModG), which came into force in June 2021. It aims to create more transparency and counteract abuses in tax refunds through electronic reporting obligations and extremely extensive reporting as well as stricter liability regulations. 

German tax certificates or specific UUIDs may only be issued by German custodian banks and must usually be requested from the last custodian via the custody chain. In order to obtain this, it is necessary to transmit a comprehensive set of data across the various custodians to the German Federal Central Tax Office (BZSt).

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Eva-Maria Than

Eva Maria-Than
Senior Sales & Business Developer

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Simplified process along the entire custody chain

TaxTrail meets the requirements of the German reporting procedure for tax certificates (MiKaDiv) between custodians or directly to the German Federal Tax Authority (BZSt). It simplifies the complex process of data management along the entire value chain. TaxTrail enables financial service providers to comply with all legal requirements and consistently provide the correct data in the appropriate format, including dividend information, tax data, and transaction histories - regardless of whether it is a German financial institution or a foreign custodian or bank.

TaxTrail calculates the relevant data and submits it to the next financial intermediary or to the German Federal Tax Authority in the required data format of the sub-custodian or the regulator. Any additional mandatory reporting to the German Federal Tax Authority is also covered by TaxTrail.

What the legislative amendment means for financial service providers

The core functions of the software solution

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Quality control

TaxTrail verifies the existing data and ensures that all necessary information is complete and in the correct format.

TaxTrail offers a comprehensive and adjustable set of rules for checking the data. At any time, the user(s) can view the checks and make adjustments if necessary.

Transformation

The delivered (raw) data is transformed and, if necessary, enriched according to the requirements of the next financial intermediary. The software supports a variety of possible formats. It is also possible to set a four-eyes principle for the substantive examination. 

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Delivery

The verified and converted datasets are delivered via TaxTrail directly to the next entity in the custodial chain. Necessary connections to the next financial intermediary are also supported to ensure seamless data transfer.

These are the advantages offered by TaxTrail

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