The German Federal Tax Office (BZSt) has initiated the processing of withholding tax (WHT) refund claims in response to two pivotal decisions issued by the German Federal Fiscal Court (BFH) in cases involving the discriminatory treatment of foreign investment funds. Although the final decision by the Hessian Tax Court is still pending, recent developments mark a significant turning point for non-resident funds seeking relief under EU law.
As of July 2025, Globe Refund's clients received WHT refunds, including Fonds Communs de Placement (FCPs). These refunds mark the first tangible implementation of the BFH’s earlier recognition that foreign funds had been unfairly taxed in comparison to their German counterparts.However, the initial refund payments represent only a fraction—15%—of the 26.375% tax originally withheld. This limited reimbursement appears to be based on Germany’s interpretation that relief could have been claimed under the bilateral Double Taxation Agreement (DTA) between Germany and Luxembourg.While the DTA theoretically offers a path to partial relief for Luxembourg residents, it is often unworkable in practice for publicly offered funds. These funds typically hold assets on behalf of numerous anonymous investors via nominee accounts, making it virtually impossible to meet the DTA’s residency documentation requirements. Additionally, the BFH’s recent rulings emphasized that discrimination must be assessed at the fund level, not based on individual investor profiles—a point that undermines the current administrative interpretation.It is therefore critical to challenge the partial nature of these refunds. In particular, funds receiving such decisions must act promptly to avoid the risk of legal finality by filing an administrative appeal within one month of receiving the refund decision.
Beyond the principal refund amounts, interest payments on overpaid WHT remain a contentious issue. The BZSt appears to be taking a restrictive stance, suggesting that interest is only owed from the point at which a refund application becomes “complete” in terms of documentation. This position conflicts with both the spirit and letter of the BFH rulings, which were grounded in EU principles.According to the BFH, the obligation to pay interest arises directly from EU law, specifically from the principle of effectiveness. Since the unjustly withheld tax deprived funds of liquidity over several years, a financial correction in the form of interest is warranted—regardless of whether minor documentation deficiencies existed at the time of filing. It is also worth noting that the BZSt’s documentary requirements have evolved over time and were not always clear or consistently applied.
Given the current administrative approach, Globe Refund strongly advises all affected funds—particularly Luxembourg FCPs and SICAVs—to take the following actions:
1. Appeal Partial Refund Decisions Promptly
Any partial refund decision should be challenged within 30 days of receipt to preserve your rights. A failure to respond in time may result in the acceptance of an unfavorable outcome.
2. Claim Full Interest Payments
Funds should demand interest based on the full period between the original withholding and the refund payout. Any rejection of interest claims should also be appealed, citing EU law and the BFH’s guidance.
3. Monitor All Communication Closely
Given the evolving nature of this process, it is essential to closely monitor refund decisions and ensure all relevant deadlines are met. Where applicable, consider granting Globe Refund power of attorney to streamline communications and safeguard against missed deadlines.
4. Ensure Accurate and Complete Submissions
Although the BFH has ruled in favor of non-discrimination, refund amounts must still be substantiated. Ensure that WHT paid is fully documented and aligns with German tax law definitions.
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