The borrower is not necessarily the beneficial owner so each case must be examined on its facts.

On 13 January 2016, the German Federal Fiscal Court (“FFC”) published the long-awaited decision regarding the transfer of the beneficial ownership in the case of securities lending transactions. Among other things, beneficial ownership is of importance for the refund or credit of withholding tax. According to the FFC’s consistent case-law, income from securities subject to securities lending is generally attributed to the borrower being the legal owner during the lending term under German law. Until the release of the new decision, which was given on 18 August 2015, it was considered that the FFC may have changed its jurisdiction on that point. Although this should in general not hold true, the FFC held that the borrower has not become the beneficial owner of the securities in the specific case. Therefore, securities lending transactions need to be increasingly considered on a case-by-case basis. Especially banks should examine whether and to what extent they should adapt the terms and conditions of their standard securities lending contracts in order to comply with the FFC’s new jurisdiction.