Germany Announces Full Refunds of Tax Reclaims to Regulated Investment Companies

Washington, DC, July 16, 2001 - The German Federal Finance Office (FFO) has announced new procedures that will permit regulated investment companies (RICs) to receive full (100 percent) refunds of all tax reclaim amounts withheld under the US-Germany Income Tax Treaty (Treaty) during calendar years 2000 and 2001 and prospectively.

The German Ministry of Finance has taken the position that RICs are entitled to benefits under the Treaty as beneficial owners of their income. For investment company purposes, a tax reclaim represents a receivable owed to a RIC by the German tax authorities in an amount equal to the difference between the 25 percent (plus 5.5 percent solidarity) German withholding tax rate on dividends and the lower 10 percent withholding tax rate to which RICs are entitled under the Treaty.

Pursuant to the new procedures, RICs certifying that more than 50 percent of their shareholders are US residents on the attached FFO certification form will receive a full (100 percent) refund of all tax reclaim amounts from the German tax authorities. The 50 percent threshold reflects the so-called "limitation on benefits" requirement for all claimants under Article 28 of the Treaty.