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Stock split tax implications for non-US shareholders
- Thread starter junas
- Start date
I accidentally put my above comment into the quote marker. Below the samw statement without that error:
Dear Avoigt thanks for the additional information provided. You have done well by having at least one account outside Germany due to the automated taxation by the German brokerage banks, which seems to always impact us negatively in case of such unclear situations. The benefit is of course that you don't need to do the calculation yourself and there is no risk to skip accidentally taxes, you would have needed to pay. But I still wish in such times I would have considered this too in the past and for sure will check on that option too for the future.
I am considered a top trader and have high tier contact at my brokerage therefore. So I definitely know from first hand that the German brokers don't seem to have any clue how to deal with the split in regards to the automated tax forwarding to our tax authorities. The Wertpapiermeldestelle is a central service provider for all German brokers and there is no information from them yet provided to the brokers.
It is highly likely that the WM will provide information to them after the 21st of August. So I have basically two options.
My first option: I don't do anything and await the split end of August. If the Broker precautionary sends the tax in the amount of 26% of 4/5 (80%) of my Tesla position and puts my euro account into a negative territory I can sell enough stocks of Tesla to balance it to zero. The rest of the stocks I wouldn't sell alltough they would cause no more taxes if I would sell them as I would be back almost at my initial value of around 220 euros per share due to the 1 to 5 split. I could then contact a lawyer to claim the wrongdoing from the german finanzamt tax authorities in hope to get the taxes back before the year 2020 closes. The finance lawyer gave me very good chances to win the case, but he admitted that it might take time after 2020 into 2021. In that case winning doesn't bring me back the actual money, if they then try do offset it with potential future gains. I would need to really give the lawyer a mandate to investigate on my options here to get the actual Euros back and I don't want to go through this due to the stress to battle a government entity.
My second option would be to sell before 21st of August and to buy the stocks back on 1 of September. In that case the split doesn't effect me, but I will still need to pay a lot of tax and more or less the same amount like due to the split, because my gains are 5 fold and more. That tax is correct but of course I would like to avoid it as my intention is to hold Tesla for at least 5 more years without selling and paying taxes.
And of course if our non German fellows here are right,then in worst case the split is interpreted correctly by the broker and I have sold them for nothing in advance of the split. Staying calm would bave done the job.
All the above mentioned optionsiate of course no advise from my side. I'm just showing the options I came up with for myself. May I ask what you will do and maybe what your argument would be? I just want to ensure that I didn't miss any other possible option.
I heard in another German forum that people are also afraid that the broker would not only pay taxes to German authorities, but also 10% quellsteuer to the US as normally for dividends of us companies we have to pay in Germany 15% to German tax authorities and the remaining 10% to us tax authorities due to the double taxation agreement Doppelbesteuerungsabkommmen.
But in my opinion this is to far stretched and as this split is not considered as taxable in usa nonsense. I also didn't faced auch a think back then when I was effected from the Google split back in 2014.
By the way a email to BMF highlighting the issue will definitely accelerate things and the more German fellows write to them and ask for a official public statement the better for all of us. At least that would convince the brokers to act accordingly in my opinion.
Dear Avoigt thanks for the additional information provided. You have done well by having at least one account outside Germany due to the automated taxation by the German brokerage banks, which seems to always impact us negatively in case of such unclear situations. The benefit is of course that you don't need to do the calculation yourself and there is no risk to skip accidentally taxes, you would have needed to pay. But I still wish in such times I would have considered this too in the past and for sure will check on that option too for the future.
I am considered a top trader and have high tier contact at my brokerage therefore. So I definitely know from first hand that the German brokers don't seem to have any clue how to deal with the split in regards to the automated tax forwarding to our tax authorities. The Wertpapiermeldestelle is a central service provider for all German brokers and there is no information from them yet provided to the brokers.
It is highly likely that the WM will provide information to them after the 21st of August. So I have basically two options.
My first option: I don't do anything and await the split end of August. If the Broker precautionary sends the tax in the amount of 26% of 4/5 (80%) of my Tesla position and puts my euro account into a negative territory I can sell enough stocks of Tesla to balance it to zero. The rest of the stocks I wouldn't sell alltough they would cause no more taxes if I would sell them as I would be back almost at my initial value of around 220 euros per share due to the 1 to 5 split. I could then contact a lawyer to claim the wrongdoing from the german finanzamt tax authorities in hope to get the taxes back before the year 2020 closes. The finance lawyer gave me very good chances to win the case, but he admitted that it might take time after 2020 into 2021. In that case winning doesn't bring me back the actual money, if they then try do offset it with potential future gains. I would need to really give the lawyer a mandate to investigate on my options here to get the actual Euros back and I don't want to go through this due to the stress to battle a government entity.
My second option would be to sell before 21st of August and to buy the stocks back on 1 of September. In that case the split doesn't effect me, but I will still need to pay a lot of tax and more or less the same amount like due to the split, because my gains are 5 fold and more. That tax is correct but of course I would like to avoid it as my intention is to hold Tesla for at least 5 more years without selling and paying taxes.
And of course if our non German fellows here are right,then in worst case the split is interpreted correctly by the broker and I have sold them for nothing in advance of the split. Staying calm would bave done the job.
All the above mentioned optionsiate of course no advise from my side. I'm just showing the options I came up with for myself. May I ask what you will do and maybe what your argument would be? I just want to ensure that I didn't miss any other possible option.
I heard in another German forum that people are also afraid that the broker would not only pay taxes to German authorities, but also 10% quellsteuer to the US as normally for dividends of us companies we have to pay in Germany 15% to German tax authorities and the remaining 10% to us tax authorities due to the double taxation agreement Doppelbesteuerungsabkommmen.
But in my opinion this is to far stretched and as this split is not considered as taxable in usa nonsense. I also didn't faced auch a think back then when I was effected from the Google split back in 2014.
By the way a email to BMF highlighting the issue will definitely accelerate things and the more German fellows write to them and ask for a official public statement the better for all of us. At least that would convince the brokers to act accordingly in my opinion.
I'm happy to hear you contacted Martin Viecha. There is a good chance you receive a clear answer from Tesla
I also received new comments today from a senior tax advisor. He kind of confirmed my feeling that the decision is not up to tax authorities. He said stock dividends are taxable and splits are non-taxable events (nothing new here). Seems like only thing what matters is how brokers execute the transaction. He was reluctant to answer my question whether "Delaware wording" about dividends must be followed slavishly in Europe. Probably it's the lack of example cases why someone working 25 years as securities tax advisor cannot answer this (at least for now).
What I've learnt in two days: Tax advisors do not know enough about stock markets and decision-making behind the scenes. They only know about taxes after a certain type of event happens. Similarly, broker call centers and let alone retail investors (sadly including this board) have no glue about complex tax laws and international tax treaties.
IMO the hot question is: Who makes the decision how brokers handle this event?
About your first point, I agree to your analysis and came to the same conclusions. Situations are different of course but if you sit on larger not realized gains to sell everything prior is, of course, a taxable event, and if you invest the refund again the number of weighted shares you own is much lower. Therefore moving forward assuming the stock price is increasing you lose gains.
If we do nothing and a negative scenario applies and the depot deducts the potentially taxed volume from our accounts, selling shares to compensate for it causes the same situation of a lower volume of weighted shares. In both cases we are f***d. But you have lower trading costs in #2.
My conclusion is to go with Scenario two because if includes the option that the tax amount is not withdrawn which would be a good outcome and gives time to clarify the situation.
I believe it's true that the chances to win a court case if we sue is high and although it may take years we talk about precedence and a lot of money to regain although we won't be compensated for the loss in share gains I believe.
For clarity, my broker sits in Germany but the larger volume of shares are located in a depot in the US. That may if I am lucky protect me from automated deducation of taxes but I am not certain.
Hope that helped
P.S. I agree we all should mail to BMF to clarify our position and make a statement of why this is not a taxable dividend but one that has a value of 0. Can you provide mail details?
I'm happy to hear you contacted Martin Viecha. There is a good chance you receive a clear answer from Tesla
I also received new comments today from a senior tax advisor. He kind of confirmed my feeling that the decision is not up to tax authorities. He said stock dividends are taxable and splits are non-taxable events (nothing new here). Seems like only thing what matters is how brokers execute the transaction. He was reluctant to answer my question whether "Delaware wording" about dividends must be followed slavishly in Europe. Probably it's the lack of example cases why someone working 25 years as securities tax advisor cannot answer this (at least for now).
What I've learnt in two days: Tax advisors do not know enough about stock markets and decision-making behind the scenes. They only know about taxes after a certain type of event happens. Similarly, broker call centers and let alone retail investors (sadly including this board) have no glue about complex tax laws and international tax treaties.
IMO the hot question is: Who makes the decision how brokers handle this event?
At least in Germany the brokers claim that they will do whatever the wertpapiermeldestelle will tell them. If I understood they have a database where there are marker for taxable/non taxable and so on. But I didn't dive deep into that as they are a closed service provider offering only service to brokers, but not to individuals.
This WM data transmission can be overruled by the german tax authority BMF. But they take a lot of time making public official announcements.
So in my opinion the online and standard brokers make it easy for themselves by referring to other entities. I doubt that you can argue against it at court. An exception would be of course a high tier private investment banking broker like JP Morgan, who for sure would have clarified this issue with way more skills and business, but unfortunately not everyone has a 10+ mio account for such a high quality brokerage with 5 star in-house consultants and service. I myself have to deal with standard German brokers unfortunately
I just received feedback from Martin Viecha
"Hey, we looked at this from every possible angle and are coming to the same conclusion over and over that this is a non-taxable event."
"Hey, we looked at this from every possible angle and are coming to the same conclusion over and over that this is a non-taxable event."
The website with the contact details is:
Kontakt - Bundesfinanzministerium - Service
I used the email address under "Postanschrift", which is:
[email protected]
There is also a phone number and if you can manage it then they may forward you to a capital gains responsible. When I tried they weren't at office anymore and they asked me to write a mail.
I used a short mail introduction to ensure that a low skill secretary understands that she needs to forward the mail to the Kapitalertragsteuer responsible. After the one liner I wrote a quite specific mail about the tesla split situation.
The guy on the phone also mentioned that he received the same request already. So I really hope that they get a high number of requests already. Unfortunately most people will react and call them for sure after the split when they eventually face negative euro accounts.
That are great news. Thank you for contacting him. But the question is, will they specify their filling and explain that this is a non taxable event to the German authorities? The Wertpapiermeldestelle should know this without a a single doubt to mark it as non taxable too, because they will forward this to the brokers. When there is room for interpretation or the non taxable character is not mentioned then this won't help us in Germany.
Just check how well done Apples filling is. They even put examples into the filling. At least an update of the official Tesla filling about this fact would be helpful.
jeewee3000
Active Member
Yes the comments in the main thread are telling of the close mindedness of some (otherwise very intelligent) posters. The viewpoint that it shouldn't be taxable because A) it's not taxable in the USA and B) it would be illogical, shows they have never encountered European tax authorities. The latter is completely fine, but it does annoy me that one would express firm views in matters completely unknown to them.
To add to the European tax authorities: Martin Viecha holds no power over them. If Belgium wants to tax, they will tax, and they won't care what the 'foreign' company says but only look at the official SEC filing, which (as @Amon agrees) lacks detail.
/endofrant /goodlucktoall
Interesting post in the main thread:
Maybe some of you did live through the Netflix split?
Link: Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable
Maybe some of you did live through the Netflix split?
Gerardf
Active Member
Unfortunately or gladly no. But I refered to this case when contacting my broker again to help them with the internal analysis how to deal with the wording.
My idea was to ask them what they did back then with the Netflix split to have a extrapolation to what they will do with Tesla. If it was non taxable for Netflix then it should be non taxable for Tesla too 5 years later with the same wording in the split announcement.
My thoughts would be flawed when there is a more detailed non public communication between company the SED and the different reporting offices around the world which will evaluate the split not buy the official filling but a more detailed electronic essage or paper form with its own specific syntax abd semantic, which will be entered in a database to generate a specific result for the broker IT Systems underlying individuals stock accounts.
Dear Gerardf, I thought that in the Netherlands there is no tax on capital gains, so whatever dividend or stock price gains you realize, you will pay 0% tax? The only taxation is a some kind of wealth tax with 1,2% per year on your net worth independent from gains and losses, isn't it? At least that was what I had found on German websites. Of course I never lived in Netherlands nor talked to any tax authorities and above is just my understanding whitout any advisory character.
Does someone here already know how their broker dealed with the nextflix split and could tell if they automatically send capital gains taxes to the tax authority, especially in Germany?
Martins response is consistent with what he wrote to me before "that makes no sense" indicating their assessment results.
What I expect to have happened here is that his team did get advice from true experts on that matter for national and international taxations who are really familiar with that matter and investigated in-depth before they decided this to be a good approach.
In order to get clarity, I asked Martin in a follow-up question if that happened.
Although his team cannot discuss that with every tax authority in the world I would assume and hope that his advisors are at least in a position to screen such events with contacts at the larger international tax authorities. That's complete speculation on my side and maybe not the case.
There is only a certain amount of clarity Tesla can get when they implement such a dividend stock split and of course if a tax authority has a different opinion they probably will not get a notice too.
However, we can be a little bit more confident now versus before.
Todesbuckler
Member
I received a reply from the BMF (Federal Ministry of Finance in Germany):
zu Ihrer Anfrage vom 13. August 2020 betreffend die o. g. Kapitalmaßnahme kann ich Ihnen Folgendes mitteilen: Die Finanzverwaltung prüft nicht vorab jede stattfindende Kapitalmaßnahme. Jährlich finden eine Vielzahl solcher Maßnahmen statt. Die Finanzverwaltung kann nur allgemeine Kriterien benennen, nach denen Kapitalmaßnahmen auf ihre steuerliche Behandlung geprüft werden können. Die Kreditwirtschaft nimmt auf Grundlage dieser Kriterien eine Einstufung der jeweiligen Maßnahmen vor. Diese Regelungen finden Sie im BMF-Schreiben vom 18. Januar 2016 (BStBl I S. 85) „Einzelfragen zur Abgeltungsteuer“ in den Randziffern 100 bis 117 dargestellt:
Einzelfragen zur Abgeltungsteuer; Neuveröffentlichung des BMF-Schreibens - Bundesfinanzministerium - Service
zu Ihrer Anfrage vom 13. August 2020 betreffend die o. g. Kapitalmaßnahme kann ich Ihnen Folgendes mitteilen: Die Finanzverwaltung prüft nicht vorab jede stattfindende Kapitalmaßnahme. Jährlich finden eine Vielzahl solcher Maßnahmen statt. Die Finanzverwaltung kann nur allgemeine Kriterien benennen, nach denen Kapitalmaßnahmen auf ihre steuerliche Behandlung geprüft werden können. Die Kreditwirtschaft nimmt auf Grundlage dieser Kriterien eine Einstufung der jeweiligen Maßnahmen vor. Diese Regelungen finden Sie im BMF-Schreiben vom 18. Januar 2016 (BStBl I S. 85) „Einzelfragen zur Abgeltungsteuer“ in den Randziffern 100 bis 117 dargestellt:
Einzelfragen zur Abgeltungsteuer; Neuveröffentlichung des BMF-Schreibens - Bundesfinanzministerium - Service
Todesbuckler
Member
Based on this document (page 47, number 111), I assume that it should not be a taxable event in Germany.
"Werden Aktien von einer Aktiengesellschaft oder einem Dritten ohne zusätzliches Entgelt an die Aktionäre ausgegeben und stammen sie nicht aus einer Kapitalerhöhung aus Gesellschaftsmitteln (Bonusaktien oder Freianteile), sind gemäß § 20 Absatz 4a Satz 5 EStG die Einkünfte aus ihrem Bezug und die Anschaffungskosten mit 0 € anzusetzen, wenn die Ermittlung der Höhe des Kapitalertrags nicht möglich ist. Davon ist bei ausländischen Sachverhalten auszugehen, es sei denn, dem Anleger steht nach ausländischem Recht (z. B. Niederlande) ein Wahlrecht zwischen Dividende und Freianteilen zu oder dem Anleger wurden mit ausländischer Quellensteuer belastete Anteile eingebucht."
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