The Naqoda Withholding Tax Calculation Engine is a multi-country software solution for the calculation and reporting of interest income tax and capital gains tax.
About German Withholding Tax
The German flat rate withholding tax or Abgeltungssteuer is a withholding tax on private income from capital and capital gains. This flat rate withholding tax came effective on the 1st of January 2009. The Naqoda Withholding Tax Calculation Engine is a software solution for automated calculation and preparation of interest income tax and capital gains tax according to article 20 EStG, article 22 section 2 EStG, in combination with article 23, paragraph 1, section 1, clause 2 through 4 EStG of the German Tax Law (Einkommenssteuergesetz). This allows a financial institution to meet the reporting requirements for capital gains and interest income reports (Jahresbescheinigung).
Features include:
- Calculation of taxable basis for:
- interest income transactions
- mutual fund buy & sell transactions, fund distribution & accumulation with coverage of both foreign and domestic funds
- equities buy & sell transactions
- bonds buy & sell transactions
- FX and FX swap transactions
- Calculation using exemption rules of exoneration amount (Freistellungsauftrag), share & other loss compensation balance and foreign source compensation balance
- Calculation of capital gains tax (Kapitalertragsteuer), church tax (Kirchensteuer) and solidarity surcharge (Solidaritatszuschlag)
- Invididual clients, married couples, associations of individuals & companies
- Management of clients static data including NV certificate, individual and joint exoneration amount, time restricted exoneration amount, percentage split for church tax
- Management of in-year changes in clients static data
- Management of securities static data including transparent & intransparent funds
- Computation of securities FIFO chain
- Support for backdated transactions & cancellations
- Online user interface with realtime tax calculation simulation
- Provision of data for monthly & yearly tax reports to authorities
- Provision of data for yearly customer tax certificate (Jahressteuerbescheinigung) & income listing (Erträgnis Aufstellung)
- Interface with data provider WMDaten
Key Features
The calculation process in 3 steps
- Firstly, on the basis of the transaction data, the gross taxable basis is calculated. For example in the case of sale of funds, this would be the difference between the sell and purchase prices, minus the costs and corrected for interim gain and other elements.
- Secondly, the client’s loss buckets, exemption amount, exemption certificate, etc are evaluated. This will possibly reduce the net taxable basis.
- Thirdly the tax is computed on the basis of the net taxable basis. Church tax and solidarity tax are also calculated at this time.
The system is designed so that new transaction groups & categories can be added to the system with minimal effort.
Key Client Data
Static data about the client required for the tax calculation are recorded in the system. This includes the following.
- Calculation relevant data:
- For all types of customers:
- client identifier
- client type: individual, member of a group, the group itself, company
- tax residence
- state (Bundesland)
- tax identification number (TIN)
- exemption certificate
- exemption certificate expiry date
- For individuals:
- confession
- exemption amount (FSA)
- exemption amount validity date
- deceased date
- assets percentage split (for married couples)
- For all types of customers:
- Reporting relevant data:
- For individuals:
- first name & last name
- title
- academic title
- previous name
- birth date
- For companies:
- company name
- For individuals:
Clients can be individual clients, groups of clients such as associations of individuals or married couples or companies.
A full history of all calculation relevant data is kept in the system for calculation purposes.
WMDaten Interface
An interface with data provider WMDaten is provided with the solution. The information provided through this interface is required for the calculation of capital gains tax on securities. This interface contains information such as deemed distributed income, accrued income, etc. This data is stored in the system together with the securities ISIN code and can be used in the automated calculation processes.
Corrections in transactions, cancellations, updates of WMDaten data feeds, changes to customer static data, etc can lead to the need to recalculate tax. An optimisation process is provided in the solution that will take care of these corrections.
Client & Bank Reporting
The solutions meets the reporting requirements for capital gains and interest income reports for both the bank and client side.
Bank:
- Monthly KEST report and payment
- Yearly FSADV report
Client:
- Yearly tax certificate (Jahressteuerbescheinigung)
- Yearly deemed distribution report for accumulating funds
- Yearly loss compensation balance certificate
- KEST certificate of a single transaction
The solution can either provide raw data or fully formatted reports. For the generation of client side reporting it includes a templating engine that allows to define templates for the various reporting formats.