The introduction of MiKaDiv1, part of the Germany’s overarching implementation of its Withholding Tax Modernization Act, is designed to simplify and digitize domestic dividend tax reporting.
The Act is meant to address inefficiencies and vulnerabilities Germany experiences in its paper-based tax system model.
Historically, the administrative process relied on tax certificates to reclaim German withholding tax, however this process proved vulnerable to errors and exploitation.
Digital switchover
In 2027, a mandatory digital reporting framework for investment income, including dividends and interest payments, will replace paper-based tax certificates or vouchers with automated digital reporting.
The goal of MiKaDiv is to enable the German Tax Authorities (“GTA”) to track custody chains and transaction timing more closely, enabling mode control over tax relief granted to recipients on investment income.
Under the model, financial institutions - including German paying agents, custodians, and domestic listed companies - must report dividend-related capital gains digitally to the GTA using standardized XML data schema.
MiKaDiv will replace paper vouchers with the issuance of unique reference numbers (UUID), received by investors, which are required in part to substantiate claims for relief.
Under the new procedure, the German sub-custodians/securities depositories will share transaction payment details with the GTA who will, in turn, issue the UUID.
Investor impacts in focus
The key impact to investors will be an onus to provide data, documentation, and certifications/attestations of their eligibility for relief to their relevant custodian.
