On 24 October 2024, the Business Identification Number (Wirtschafts-Identifikationsnummer), or Business ID for short, of s139c of the German Fiscal Code (Abgabenordnung, AO) will be introduced and will be automatically issued in several steps to all individuals and legal entities doing business in Germany as from November 2024.
The introduction of the Business ID will require credit institutions to make necessary adjustments to their Know Your Customer (KYC) processes: In the future, they will have to also collect and record the Business ID for each account holder, each other authorised person and each beneficial owner as defined by the German Anti-Money Laundering Act (Geldwäschegesetz, GwG) to ensure account accuracy in accordance with s154 AO and include it in their reports to the German Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt).
Please find below an overview of how the introduction of the Business ID will affect the KYC process of credit institutions.
With the 'Business Identification Number Regulation' (Wirtschafts-Identifikationsnummer-Verordnung)1 published in the German Federal Law Gazette on 2 October 2024, the Federal Ministry of Finance (Bundesministerium für Finanzen, BMF) is making use of the power under s139d AO to issue a regulation on the introduction of a Business ID more than twenty years after the legal basis for such ID was created in s139c AO:
As from November 2024, the BZSt will, in several steps and automatically, assign a Business ID to every individual and legal entity doing business in Germany for their unambiguous identification.
The Business ID will be kept for the duration of the entire business activity and will not change. This will also be the case when, e.g., the name or the address changes. The identification number of s139b AO, the tax number and the VAT identification number will remain in place in addition to the Business ID.
The structure of the Business ID corresponds to that of the German VAT Identification Number (VAT ID). Like the VAT ID, the Business ID consists of the letters 'DE' and nine digits plus a five-digit distinguishing feature for each economic activity, starting with 00001 when first allocated.
For each additional economic activity, each additional business and each additional permanent establishment of an economically active individual or legal entity, more distinguishing numbers will be assigned to them in consecutive numbering and in the chronological order of data transmission to their competent tax authority as from 1 March 2026.
Example: Business ID initially allocated: DE123456789-00001, and from 1 March 2026, when taking up another economic activity: DE123456789-00002.
As from November 2024, the Business ID will be issued by the BZSt in several steps and without any application process either by public notification or electronically via the ELSTER user account.
Stage 1: In a first stage, individuals and legal entities doing business who have been issued a VAT ID by 30 November 2024 will be assigned a first Business ID with the distinguishing number 00001. It will correspond to the existing VAT ID but will include the additional distinguishing feature. The issuance is expected to start in November 2024 by an announcement in the Federal Tax Gazette (Bundessteuerblatt) and can be found on the BZSt website.
Stage 2: In a second stage, the Business ID is issued to individuals and entities who are registered for VAT purposes or are small entrepreneurs (Kleinunternehmer) as defined in the German VAT Act (Umsatzsteuergesetz, UstG), but who have not been issued a VAT ID by 30 November 2024. In this case, the BZSt will allocate the Business ID electronically via the ELSTER user account as from 1 December 2024.
Stage 3: All other individuals and legal entities doing business will receive their Business ID as from 1 July 2025.
When the Business ID is issued for the first time, it will have the distinguishing number 00001. The allocation of distinguishing numbers for any additional economic activity (00002, 00003, etc.) will not start until 1 March 2026.
The introduction of the Business ID will require credit institutions to make necessary adjustments to their KYC processes. Since 2018, these have included extensive tax-related KYC obligations in addition to those under anti-money laundering law with regard to account authenticity as set forth in s154 AO.
Complying with both tax and anti-money laundering KYC obligations continues to be a challenge for many credit institutions due to the different areas of law involved. At the same time, the importance of tax-related KYC obligations and the associated interface issues continues to grow following new legislative initiatives to combat tax evasion and money laundering, such as the new EU anti-money laundering package or the reform(s) of the capital gains tax relief procedure (see: Withholding Tax Relief Modernisation Act (Abzugsteuerentlastungsmodernisierungsgesetz, AbzStEntModG), EU FASTER initiative). Violations are increasingly coming into the focus of supervisory and tax authorities and entail risks under criminal tax law.
Specifically, the following immediate need for action arises:
Pursuant to s93b (1a) AO in conjunction with s24c of the German Banking Act (Kreditwesengesetz, KWG), s154 AO, credit institutions must now also collect and record the Business ID for each account holder, each other authorised person and each beneficial owner and store it in the account retrieval file. In addition, reports to the BZSt must from now on include the Business ID. So far, the statutory transitional provision of s154 (2a) (1) AO applied, according to which the tax number for taxation of income was to be used until the Business ID was issued if the party doing business was not a natural person.
With the allocation of the Business ID as from November 2024, it must now be ensured that the Business ID is collected for new customers in future. The existing KYC processes, reporting channels to the BZSt, documents for customer onboarding and procedural documentation must be adapted appropriately. The same applies to system-based plausibility checks, which must now also include the Business ID.
In the interests of legal clarity and to avoid the threat of significant compliance costs that would otherwise arise, it is to be hoped that an appropriate transitional arrangement will be found, which is currently being discussed as part of the Annual Tax Act 2024.
1 Regulation on the Issuance of Business Identification Numbers for Tax Purposes (Verordnung zur Vergabe steuerlicher Wirtschafts-Identifikationsnummern, WIdV) dated 30 September 2024, German Federal Law Gazette (Bundesgesetzblatt, BGBl.) 2024 Part I No. 293).
The authors are members of ADVANT Beiten's tax and white-collar crime law department and specialise in the avoidance, support and resolution of tax and criminal law risks in the financial sector.
As a highly specialised unit with many years of industry experience in the financial sector, we combine criminal law competence with tax law expertise and regulatory know-how.
The advisory services focus on tax and white-collar criminal law, anti-financial crime and financial sanctions as well as related compliance issues and the conduct of internal investigations. In addition to preventive advice, we advise and defend clients in tax and white-collar criminal matters and represent companies and individuals in tax and regulatory proceedings before financial and specialised authorities (e.g. BaFin, Bundesbank).
All lawyers in the team are also qualified as Certified AML & Anti-Fraud Officers and have extensive litigation and implementation experience with regard to updating tax and anti-money laundering obligations in the KYC processes of credit institutions.
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