A transfer of assets can lead to a deemed disposal

Withdrawals from and transfers between investment accounts can generally lead to tax liability, as Section 27(6) of the German Income Tax Act (EStG) provides for deemed disposal scenarios for these actions. This then results in the realisation of capital gains for taxation purposes and an adjustment of acquisition costs after the realisation event. However, an exception to this applies when the transfer is to an account held by the same taxpayer and continuous taxation through withholding is guaranteed for the future. This covers all transfers to an account held by the same taxpayer – in particular, to another account with the same account-holding institution; from a foreign account-holding institution to an account with a domestic account-holding institution; from a domestic account-holding institution to an account with a domestic account-holding institution; from a domestic account-holding institution to an account with a foreign account-holding institution; and from a foreign account-holding institution to an account with another foreign account-holding institution.

When transferring from a domestic custody account to a custody account held by the same investor at another foreign custodian, tax exemption (no notional sale) only applies if the taxation of the capital investments remains guaranteed. A further important prerequisite is that the domestic transferring custodian submits certain information to the tax office (for large companies) as instructed. The notification must be made within one month of the date of transfer and is generally to be made electronically. The notification must include the following data:

• The full name of the taxpayer (or company name or designation),
• Tax or social security number,
• Address and date of birth,
• the clearly identifiable designation of the transferred economic assets (incl. ISIN, quantity and/or nominal value),
• Acquisition costs of the transferred assets and
• depot-holding body to which the transfer is made.

The deduction of capital gains tax (fictitious realisation event) can only be omitted if these details are correctly communicated, with the correction of the communicated details being possible up until the expiry of the one-month period. However, it should be noted that communication by the account holder themselves does not have a releasing effect.

If no consent is given for the transfer of data to the tax office, the transferring domestic custodian must deduct capital gains tax (KESt) at the time of the depot transfer. If the notification is not made or is made late despite being commissioned, or if it is incomplete or contains incorrect data, the transfer process becomes taxable (due to the non-application of the exception).

Finally, when transferring from a foreign deposit account to another foreign deposit account held by the same taxpayer, notification to the tax office must be made within one month to avoid taxation upon withdrawal from the deposit account. This includes transfers within the same country as well as those to other countries. The data to be reported is generally the same as that listed above – however, the notification must be made by the taxpayer and not by the bank.

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