Until now, taxpayers belonging to a religious community authorised to levy church tax have been required to subject their investment income to church tax under the flat-rate withholding tax regime (Abgeltungsteuer). This can be done either by way of direct tax withholding when the investment income is paid out or in the course of the annual income tax return.
From 1 January 2015 onwards, church tax withholding must be carried out exclusively within the flat-rate withholding tax procedure. All entities obliged to withhold tax on investment income (e.g. credit institutions, insurance companies and corporations) must query the religious affiliation of the taxpayers concerned with the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt). Please note: this affects all companies (including single-shareholder GmbHs) that make payments subject to capital gains tax (e.g. distributions) to their shareholders; hereinafter referred to as the "withholding entity". On this basis, the church tax attributable to the flat-rate withholding tax is determined and remitted to the tax office. If the creditor of the investment income does not belong to any religious community, this is communicated to the withholding entity by way of a zero notification. The following preparatory steps must be taken in connection with the new church tax withholding procedure under § 51a Abs. 2c EStG:
- By 31 May 2014: fulfilment of the duty to inform recipients of investment income by the withholding entity
- By 30 June 2014: declaration of blocking notices to the BZSt if disclosure of religious affiliation is to be suppressed
- By 31 August 2014: admission procedure should have been completed
- From 1 September to 31 October 2014: regular query of the church tax withholding attributes
- From 1 January 2015: use of the query results regarding church tax withholding attributes in the capital gains tax return
Duty to Inform By 31 May 2014, all recipients of investment income should be informed by the withholding entity about the forthcoming query of church tax withholding attributes and about their right of objection, which allows them to prevent the disclosure of church tax data (the so-called blocking notice). Declaration of Blocking Notice By submitting a declaration of blocking notice, recipients of investment income may apply to the BZSt for the entry or deletion of blocking notices pursuant to § 51a Abs. 2e EStG. With a blocking notice in place, the withholding entity does not receive any information when it makes its annual query regarding the religious affiliation of its recipients of investment income. The application to set the blocking notice may be submitted to the BZSt on the officially prescribed form or electronically via the BZSt online portal; in such cases, the church tax is collected retroactively in the course of the income tax assessment, so the taxpayer is obliged to file an income tax return. The taxpayer's competent tax office is notified of any blocking notice that has been set and will then require the taxpayer to file a tax return. Blocking notices must be received by the BZSt by 30 June of each year in order to be taken into account in the regular query of church tax withholding attributes during the period from 1 September to 31 October. Admission Procedure: Registration for the Electronic Query Procedure Every withholding entity is required to accredit itself once for the church tax retrieval procedure (Kirchensteuerabrufverfahren, KiStA). For this purpose, registration in the BZSt online portal is first required. An existing Elster certificate may also be used for the data retrieval. Further information is available at www.bzst.de. Following registration, the withholding entity receives a procedural identifier for the church tax withholding procedure, which must be used in the future to query the church tax withholding attributes of the creditors of investment income. Regular Query of Church Tax Withholding Attributes Once a year, in the period from 1 September to 31 October, the entity obliged to withhold church tax must query the BZSt to determine whether the creditor of the investment income is subject to church tax as of 31 August of the relevant year. This is known as the regular query. In response to the query, the BZSt notifies the church tax withholding entity of the legal affiliation to a tax-levying religious community and the church tax rate applicable to that religious community at the time of the query as an automatically retrievable attribute. If the creditor of the investment income does not belong to any religious community, a zero value is transmitted to the withholding entity. A zero value is also transmitted where a blocking notice is in place. Where a zero value is transmitted, no church tax withholding is to be carried out. A so-called ad hoc query may only be made at the request of a recipient of investment income (e.g. in the event of changes in denomination) or on the establishment of new relationships (e.g. new shareholdings). This ensures that changes can be taken into account in the course of capital gains tax withholding. Obligations of the Withholding Entity In good time before the regular or ad hoc query, the debtor of the capital gains tax must be informed in writing or in another suitable form by the church tax withholding entity about the forthcoming data query and about the right of objection vis-à-vis the BZSt regarding the transmission of data on religious affiliation. Performing the Church Tax Withholding If church tax liability exists on 31 August or at the time of accrual, the church tax withholding entity must carry out the church tax withholding for the tax-levying religious community and remit the church tax amount to the tax office responsible for it. If the regular query confirms the church tax liability, the church tax withholding entity must apply this as the basis for church tax withholding for the entire calendar year following the reference date. Conclusion In summary, from 1 January 2015 onwards, all companies that pay out income subject to church tax will be more extensively involved in fulfilling tax obligations. The state thereby secures additional tax revenue.
Frequently asked questions
Frequently asked questions
How is church tax withheld on investment income from 1 January 2015?
From 1 January 2015, church tax on investment income subject to the flat-rate withholding tax (Abgeltungsteuer) is automatically withheld as part of the tax deduction process. The entities required to withhold the tax — such as banks, insurance companies and corporations — submit an annual query to the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt) to determine the religious affiliation of the recipient. Based on this information, the church tax is calculated and remitted to the tax office (Finanzamt).
Which companies are affected by the new church tax withholding procedure?
All companies that make payments subject to capital gains tax — such as profit distributions to shareholders — are affected. This expressly includes small corporations such as a one-person GmbH. They too must register with the BZSt for the church tax retrieval procedure (KiStA) and query the religious affiliation of their shareholders.
What is the blocking notice under Section 51a (2e) EStG and what are its consequences?
By filing a blocking notice (Sperrvermerk) with the BZSt, the recipient of investment income can object to the disclosure of their religious affiliation to the party required to withhold tax. That party then only receives a zero value, and no church tax is withheld. Instead, the church tax is subsequently assessed as part of the income tax assessment, which obliges the taxpayer to file an income tax return. The blocking notice must be received by the BZSt by 30 June of a given year in order to take effect for the following standard inquiry.
When does the regular query for church tax withholding features take place at the BZSt?
The regular query is conducted once a year between September 1 and October 31. The cut-off date for church tax liability is August 31 of the respective year. The BZSt informs the withholding entity of the religious affiliation and the applicable church tax rate; if there is no affiliation or if a blocking notice has been set, a zero value is transmitted.
What disclosure obligations does the party required to withhold tax have toward recipients of capital gains?
The party required to withhold tax must inform its recipients of capital gains in writing or in another suitable form, in due time before the regular or event-based query, about the upcoming data retrieval from the BZSt. The notice must also point out the right to object to the transmission of religious affiliation (Sperrvermerk). This information enables the recipient to apply for a Sperrvermerk in good time.
When is an event-based query permitted instead of the regular annual query?
An event-based query (Anlassabfrage) may only be carried out at the express request of the recipient of investment income, for example in the case of a change of religious affiliation, or upon new circumstances such as newly established shareholder relationships. It ensures that mid-year changes are correctly reflected in the church tax deduction on investment income.