MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
This memorandum constitutes attorney work product and is protected by the attorney-client privilege. It is intended solely for the use of the individuals and entities identified below and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
FROM: Leonard Cross, Specialist Partner, Tax, Calderwood & Harkness LLP
TO: Vivienne St. Claire, Responsible Partner, Capital Markets, Calderwood & Harkness LLP Claire Dempsey, Lead Associate, Capital Markets Audrey Zhou, Working Associate, Capital Markets
CC: Robert Adeyemi, Billing Partner, Capital Markets, Calderwood & Harkness LLP Wilhelm Ostermann, General Counsel (Chefjustitiar), Halcyon Semiconductor AG (for discussion purposes)
DATE: February 10, 2026
RE: Treaty Benefit Certification Procedures for US Holders of American Depositary Shares — Halcyon Semiconductor Aktiengesellschaft Level III ADR Program
MATTER NO.: 1032-00003
Calderwood & Harkness LLP
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I. Executive Summary
The purpose of this memorandum is to analyze the Internal Revenue Service ("IRS") documentation requirements and the corresponding German tax administrative procedures that enable United States holders of American Depositary Shares ("ADSs") of Halcyon Semiconductor Aktiengesellschaft ("Halcyon" or the "Company") to claim the reduced fifteen percent (15%) withholding rate on dividends under Article 10 of the Convention Between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes (the "Treaty" or the "US-Germany Income Tax Treaty"), in lieu of the statutory German withholding tax rate of 26.375% (comprised of 25% Kapitalertragsteuer plus 5.5% Solidaritätszuschlag thereon).
Transaction Context. Halcyon Semiconductor AG, a stock corporation (Aktiengesellschaft) organized and existing under the laws of the Federal Republic of Germany, with its registered office in Munich, Germany (registered under HRB 217458 at the Amtsgericht München; existing listing FRA: HCY on the Frankfurt Stock Exchange, Prime Standard segment), is pursuing a US initial public offering ("IPO") via a Level III American Depositary Receipt ("ADR") program. The offering targets gross proceeds of approximately $900,000,000. The ADSs are expected to be listed on the Nasdaq Global Select Market under the ticker symbol "HCYN." The due diligence phase of this transaction commenced on January 27, 2026, and the working timeline contemplates a pricing window in the third quarter of 2026.
ADS Structure. Each ADS will represent two (2) ordinary shares (Stammaktien) of Halcyon. The depositary for the ADR program is Meridian Trust Company, N.A., a national banking association with its principal office at 101 Barclay Street, New York, NY 10286 (primary contact: Patricia Novak, Vice President, Depositary Receipts). The transfer agent and registrar for the ADSs is Crestfield Transfer Services Inc., located at 6201 15th Avenue, Brooklyn, NY 11219 (primary contact: Angela Moretti, Director, Corporate Actions). The Deposit Agreement governing the ADR program will be governed by the laws of the State of Delaware.
Key Conclusion. Proper certification procedures through the depositary-custodian chain are critical to ensuring that US holders of ADSs receive the benefit of the 15% treaty-reduced withholding rate on dividends paid by Halcyon. Absent proper documentation and the operational infrastructure necessary to transmit treaty benefit claims through the multi-tier custodial chain, the full statutory German withholding tax rate of 26.375% will apply to dividend payments. This would create a materially adverse tax outcome for US ADS holders and, if not addressed adequately, could generate significant investor relations issues post-IPO. The preferred outcome is that Meridian Trust Company, N.A., acting as depositary, establishes and maintains the operational arrangements — ideally supported by a valid Qualified Intermediary ("QI") agreement with the IRS that is recognized by German tax authorities — necessary to facilitate the application of the 15% treaty rate at source. In the absence of such arrangements, US ADS holders would be required to pursue individual refund claims with the German Federal Central Tax Office (Bundeszentralamt für Steuern, or "BZSt"), a process that typically requires six to eighteen months and imposes meaningful administrative burdens.
This memorandum complements, and should be read in conjunction with, the companion memorandum on the Qualified Intermediary (QI) Analysis for Meridian Trust Company, N.A., as well as the draft prospectus taxation section currently under preparation. Cross-references to additional related memoranda and working documents are provided in Section XII and Appendix D hereof.
II. Background: The ADR Dividend Payment Chain
An understanding of the structural mechanics of the dividend payment chain in a Level III ADR program is essential to the analysis of treaty benefit certification procedures. This Section describes the flow of dividends from Halcyon to the ultimate US ADS holders and identifies the points at which German withholding tax is imposed.
A. Structure of Dividend Flows
The flow of dividend payments in the Halcyon ADR program will proceed through a multi-tier custodial structure, as follows:
1. Declaration and Payment by Halcyon. Halcyon Semiconductor AG declares dividends denominated in euros on its ordinary shares (Stammaktien). Dividend declarations are made by the general meeting of shareholders (Hauptversammlung) upon proposal by the management board (Vorstand) and supervisory board (Aufsichtsrat), in accordance with the German Stock Corporation Act (Aktiengesetz) and Halcyon's articles of association (Satzung). Dividends are paid through Halcyon's dividend-paying bank in Germany.
2. Custody of Underlying Shares. The ordinary shares underlying the ADSs will be held by a German sub-custodian appointed under the Deposit Agreement. The sub-custodian is expected to hold such shares through the Ashgrove Enterprises Banking AG settlement infrastructure, which provides the central securities depository and settlement system for German-listed securities. The identity of the German sub-custodian has not yet been finalized as of the date of this memorandum but will be designated by Meridian Trust in consultation with Halcyon.
3. Payment to German Custodian. Dividends declared on the deposited ordinary shares are paid by Halcyon (through its dividend-paying bank) to the German custodian. At this stage, German withholding tax (Kapitalertragsteuer plus Solidaritätszuschlag) is imposed and deducted at source, as described in Section II.B below.
4. Remittance to Meridian Trust. The German custodian remits the net-of-withholding dividend amounts to Meridian Trust Company, N.A., as depositary, in accordance with the terms of the custodian agreement and the Deposit Agreement.
5. Currency Conversion and Distribution. Meridian Trust converts the euro-denominated net dividend amounts to United States dollars at the prevailing exchange rate and distributes the dollar-denominated net dividends to ADS holders through The Depository Trust Company ("DTC"). Prior to distribution, Meridian Trust deducts the applicable depositary fees, which include the $0.05 per ADS per annum depositary service fee payable by ADS holders pursuant to the Deposit Agreement, as well as any other fees and charges permitted thereunder.
6. Distribution Through DTC to ADS Holders. ADS holders receive dividend distributions through their respective brokers, banks, or other nominees that are DTC participants. The DTC participant credits the dividend to the ADS holder's account in accordance with the DTC participant's customary practices. The vast majority of ADS holders will hold their ADSs in "street name" through DTC participants and will not have a direct relationship with Meridian Trust.
This multi-tier structure — Halcyon → German custodian → Meridian Trust → DTC → broker/nominee → ADS holder — creates both operational complexity and documentation requirements for purposes of claiming treaty benefits at each layer of the chain.
B. Withholding Tax Trigger Point
German withholding tax on dividends (Kapitalertragsteuer) is imposed at source under Section 43 et seq. of the German Income Tax Act (Einkommensteuergesetz, "EStG"). The withholding obligation arises at the point at which the dividend is credited to the shareholder or, more precisely, at the time the dividend payment is made by the company's dividend-paying bank to the custodian holding the shares.
The statutory rates applicable to the Halcyon dividend payments are as follows:
• Withholding tax rate (*Kapitalertragsteuer*): 25% of the gross dividend amount.
• Solidarity surcharge (*Solidaritätszuschlag*): 5.5% of the withholding tax amount (i.e., 5.5% × 25% = 1.375% of the gross dividend amount).
• Effective combined statutory rate: 26.375% of the gross dividend amount.
Under Article 10 of the US-Germany Income Tax Treaty, the applicable treaty-reduced withholding rate for portfolio investors (i.e., holders that do not directly hold at least 10% of the voting power of the paying company) is 15% of the gross dividend amount. For corporate holders that directly hold at least 10% of the voting power, the rate is reduced to 5%.
The critical question addressed in this memorandum is how US ADS holders — who hold beneficial interests in Halcyon's ordinary shares indirectly through the multi-tier depositary receipt structure described above — can demonstrate their eligibility for the reduced treaty rate to the German withholding agent in the custodial chain.
III. Applicable Treaty Provisions
This Section reviews the relevant provisions of the US-Germany Income Tax Treaty and related guidance bearing on the availability and conditions of the reduced withholding rate for US holders of Halcyon ADSs.
A. US-Germany Income Tax Treaty — Article 10 (Dividends)
Article 10 of the Treaty governs the taxation of dividends and establishes the allocation of taxing rights between the United States and Germany.
Article 10(1) provides that dividends paid by a company that is a resident of a Contracting State (in this case, Germany) to a resident of the other Contracting State (in this case, the United States) may be taxed in the other state. That is, the United States retains the right to tax its residents on dividends received from a German company such as Halcyon.
Article 10(2) provides, however, that the Contracting State in which the paying company is a resident (Germany) may also tax such dividends, but if the beneficial owner of the dividends is a resident of the other Contracting State (the United States), the tax so charged shall not exceed:
(a) 5% of the gross amount of the dividends if the beneficial owner is a company that directly holds at least 10% of the voting power of the company paying the dividends; or
(b) 15% of the gross amount of the dividends in all other cases.
For the vast majority of US ADS holders — including both retail investors and institutional portfolio investors holding fewer than 10% of Halcyon's voting shares — the applicable treaty rate is 15%. It is worth noting the practical significance of the 10% threshold in the context of Halcyon's anticipated post-IPO capitalization. Following the IPO, Halcyon is expected to have approximately 245,000,000 ordinary shares outstanding (215,000,000 pre-IPO shares plus 30,000,000 new shares issued in the offering). The 10% threshold would therefore require ownership of at least 24,500,000 ordinary shares, which is equivalent to 12,250,000 ADSs (at the ratio of 1 ADS = 2 ordinary shares). This threshold is unlikely to be reached by typical US portfolio holders, though the possibility that a large institutional investor could approach or exceed this level cannot be categorically excluded and should be monitored.
The difference between the statutory rate (26.375%) and the treaty rate (15%) represents a reduction of 11.375 percentage points, which constitutes a material benefit for US ADS holders. For purposes of illustration, on a hypothetical annual dividend of €1.00 per ordinary share (i.e., €2.00 per ADS), the differential in withholding would amount to approximately €0.2275 per ADS (approximately $0.25 at current exchange rates), a difference that compounds significantly across the holdings of a diversified US investor base.
B. Limitation on Benefits (LOB) — Article 28
Article 28 of the Treaty contains limitation on benefits ("LOB") provisions designed to prevent "treaty shopping" — i.e., the use of the Treaty by persons who are not bona fide residents of the United States or Germany to obtain treaty benefits to which they would not otherwise be entitled.
Under Article 28, a resident of the United States claiming benefits under the Treaty must satisfy one or more of the qualifying tests set forth therein. The principal tests include:
(i) Publicly Traded Company Test. The holder is a company whose principal class of shares is regularly traded on a recognized stock exchange.
(ii) Ownership and Base Erosion Test. The holder is an entity that satisfies both an ownership test (more than 50% of the beneficial interests are owned by qualifying persons) and a base erosion test (less than 50% of gross income is paid to non-qualifying persons in deductible form).
(iii) Active Trade or Business Test. The holder is engaged in the active conduct of a trade or business in the United States, and the income item for which treaty benefits are claimed is connected with or incidental to that trade or business.
(iv) Derivative Benefits Test. The holder is entitled to benefits by reason of the derivative benefits provision applicable to certain entities whose owners would independently qualify for treaty benefits.
(v) Competent Authority Determination. In the absence of satisfaction of any of the foregoing tests, the holder may request a discretionary determination from the German competent authority (Bundeszentralamt für Steuern) that the granting of treaty benefits is appropriate.
Individual US holders generally qualify as "qualified persons" under the Treaty and are not subject to the LOB restrictions in any material respect. Their treaty eligibility is established by their US residency status.
Corporate and institutional holders — including US pension funds, mutual funds, insurance companies, and other entities — must separately analyze their compliance with the LOB provisions. In many cases, large publicly traded US institutional investors will satisfy the publicly traded company test or the ownership/base erosion test. However, the analysis is fact-specific and cannot be conducted on a blanket basis.
The prospectus tax disclosure section should note that the LOB provisions may limit the availability of treaty benefits for certain categories of US holders and that holders should consult their own tax advisors as to their eligibility under Article 28.
C. Beneficial Ownership Requirement
Treaty benefits under Article 10 are available only to the "beneficial owner" of the dividends. This requirement raises a threshold question in the context of the ADR structure: whether the ADS holder — rather than the depositary (Meridian Trust) or the German custodian — is treated as the beneficial owner of the underlying dividends for treaty purposes.
Under both US and German tax law, the ADS holder is generally treated as the beneficial owner of the dividends paid on the ordinary shares underlying the ADSs. This conclusion is supported by the following considerations:
(a) US Tax Law. Under US federal income tax principles, the holder of an ADR or ADS is treated as the owner of the underlying shares for US tax purposes. The depositary and the custodian are treated as agents or nominees, not as beneficial owners. See Rev. Rul. 65-218, 1965-2 C.B. 566 (depositary receipt holders treated as owners of the underlying shares); IRS Notice 2010-46; Treas. Reg. § 1.1441-1(c)(6).
(b) German Tax Law. Under German administrative guidance, the holder of a depositary receipt is generally treated as the beneficial owner (wirtschaftlicher Eigentümer) of the dividends on the underlying shares. The Federal Ministry of Finance (Bundesministerium der Finanzen, "BMF") has issued circulars confirming this treatment in the context of ADR programs, provided that the ADS holder bears the economic risk and reward of ownership and the depositary or custodian acts solely in a fiduciary or nominee capacity. See BMF circular dated November 12, 2014 (IV C 1 – S 2204/13/10003), as amended.
Accordingly, we do not anticipate that the beneficial ownership requirement will present a material obstacle to US ADS holders' claims for treaty benefits on Halcyon dividends, provided that the documentation chain adequately identifies the ADS holders as the beneficial owners.
IV. IRS Documentation Requirements
This Section discusses the IRS documentation requirements applicable to holders of Halcyon ADSs and the interplay between the US withholding tax documentation system and the German treaty benefit claim procedures.
A. Forms W-8BEN and W-8BEN-E — Overview
Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)) is used by foreign individuals to certify their foreign status and, where applicable, to claim treaty benefits for purposes of US withholding tax under Internal Revenue Code ("IRC") Sections 1441 through 1443. Form W-8BEN-E (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)) serves the analogous function for foreign entities.
An important distinction must be drawn at the outset. US holders of Halcyon ADSs are, by definition, US persons. As such, US holders would typically provide Form W-9 (Request for Taxpayer Identification Number and Certification) — not Form W-8BEN or W-8BEN-E — to US withholding agents and intermediaries. The W-8BEN and W-8BEN-E forms are relevant for non-US holders of ADSs who must certify their non-US status and claim applicable treaty benefits under the US withholding tax system.
Clarification for Purposes of This Memorandum. For US holders of Halcyon ADSs, the relevant documentation requirements for obtaining the reduced German treaty rate are directed at the German withholding tax system — not the US withholding tax system. The German treaty benefit claim procedures are discussed in detail in Section V below. However, the Forms W-8BEN and W-8BEN-E are relevant in this analysis in two important respects:
(i) Depositary's Documentation Collection. Meridian Trust Company, N.A., as depositary, collects documentation from both US and non-US ADS holders. The Forms W-9 (from US holders) and W-8BEN / W-8BEN-E (from non-US holders) maintained by Meridian Trust form the foundation of the depositary's ability to certify the treaty-eligible status of its holders to the German custodian and to the German withholding agent.
(ii) QI / Non-QI Withholding Agent Status. Meridian Trust's QI status under its agreement with the IRS directly affects its ability to make pooled certifications of treaty eligibility to German tax authorities. The QI agreement contemplates the depositary's maintenance and review of Forms W-8 and W-9 from account holders. The interplay between the QI documentation requirements and the German treaty relief procedures is a central issue in this analysis and is addressed further in Section VI below and in the companion QI memorandum.
B. US Holders — Form W-9 and IRS Information Reporting
US individual and entity holders of Halcyon ADSs must provide a valid Form W-9 (Request for Taxpayer Identification Number and Certification) to their broker, DTC participant, or (in the case of registered holders) directly to Meridian Trust Company, N.A.
The Form W-9 serves the following purposes in the ADS context:
(a) Establishment of US Tax Residency. The Form W-9 certifies that the holder is a US person as defined in IRC Section 7701(a)(30). This certification is relevant not only for US information reporting purposes but also as a foundational element of the holder's claim to US residency under the Treaty for purposes of the German treaty benefit procedures.
(b) Taxpayer Identification Number (TIN). The Form W-9 provides the holder's Social Security Number (for individuals) or Employer Identification Number (for entities), which is required for IRS information reporting on Form 1099-DIV.
(c) Exemption from Backup Withholding. A validly completed Form W-9 certifies the holder's non-exempt or exempt status for purposes of backup withholding under IRC Section 3406. Holders who certify their TIN and are not subject to IRS notification of underreporting are exempt from backup withholding.
Failure to Provide Form W-9. US holders who fail to provide a valid Form W-9 are subject to backup withholding at the rate of 24% on dividend distributions. Backup withholding is discussed further in Section X.B below.
Critically, the Form W-9 does not, by itself, establish the holder's eligibility for the reduced German treaty rate. The Form W-9 is a US-side document. The claim for the reduced German withholding rate under Article 10 of the Treaty requires separate certification directed at the German tax authorities, as described in Section V below. However, the Form W-9, by establishing the holder's US residency, forms the evidentiary basis upon which Meridian Trust (if acting as a QI) may certify the holder's treaty-eligible status to the German custodian.
C. Non-US Holders — Form W-8BEN / W-8BEN-E
Non-US holders of Halcyon ADSs must provide Form W-8BEN (for individuals) or Form W-8BEN-E (for entities) to Meridian Trust Company, N.A., or to their intermediary in the DTC chain. These forms certify the holder's non-US status for purposes of US withholding under IRC Sections 1441 through 1442 and, where applicable, claim treaty benefits under an applicable US income tax treaty.
Non-US holders of Halcyon ADSs are generally not eligible for the US-Germany treaty rate, which benefits US residents only. However, holders who are residents of other jurisdictions that have income tax treaties with Germany may be eligible for reduced German withholding rates under their own applicable treaties with Germany. For example, a holder resident in the United Kingdom may claim reduced German withholding under the UK-Germany income tax treaty, subject to the procedures and documentation requirements of that treaty and German administrative practice.
This memorandum focuses on the treaty benefit certification procedures applicable to US holders of Halcyon ADSs. The treaty claims of non-US holders resident in third-country treaty jurisdictions present a separate and distinct analysis that is beyond the scope of this memorandum.
V. German Treaty Benefit Claim Procedures
This Section describes the two principal procedures available to US ADS holders for claiming the benefit of the reduced 15% withholding rate under Article 10 of the Treaty: (a) relief at source and (b) the refund procedure.
A. Standard Procedure — Bundeszentralamt für Steuern (BZSt)
The German Federal Central Tax Office (Bundeszentralamt für Steuern, "BZSt"), located in Bonn, administers claims for reduced withholding or refunds of excess withholding under Germany's bilateral income tax treaties. The BZSt is the competent authority for purposes of the Treaty and processes both relief-at-source applications and refund claims submitted by non-resident beneficial owners of German-source dividends.
Two primary procedures are available:
1. Relief at Source (*Freistellung/Erstattung im Steuerabzugsverfahren*). Under the relief-at-source procedure, the reduced treaty rate is applied at the time the dividend is paid. This means that the German custodian or withholding agent withholds only 15% (rather than the full 26.375% statutory rate), and the US ADS holder receives a net dividend reflecting the treaty-reduced withholding from the outset. This is the preferred outcome for ADS holders, as it eliminates the need for subsequent refund claims and avoids the opportunity cost of excess withholding.
2. Refund Procedure (*Erstattungsverfahren*). Under the refund procedure, the full statutory rate of 26.375% is withheld at source, and the US ADS holder subsequently files a claim with the BZSt for a refund of the excess withholding (i.e., the difference between the 26.375% statutory rate and the 15% treaty rate, or 11.375% of the gross dividend amount). This procedure is the fallback option when relief at source is not available or not operationally feasible.
The practical availability of each procedure in the context of the Halcyon ADR program is discussed in Sections V.B and V.C below.
B. Relief at Source — Practical Challenges for ADR Holders
The relief-at-source procedure requires advance certification to the German paying agent (Halcyon's dividend-paying bank) or custodian (Depotbank) establishing that the beneficial owner of the dividends is a resident of a treaty partner jurisdiction and is eligible for the reduced withholding rate.
For direct shareholders — i.e., holders who hold ordinary shares directly in their own name through a German custodian — the relief-at-source procedure can be accomplished in a relatively straightforward manner. The shareholder provides a certificate of residence (Ansässigkeitsbescheinigung) issued by the relevant tax authority of the shareholder's country of residence. For US persons, this certificate is IRS Form 6166 (Certification of U.S. Tax Residency), which is discussed in Section V.D below. The German custodian, upon receipt of a valid Form 6166 and any additional required German tax forms, applies the reduced 15% withholding rate at the time of dividend payment.
For ADS holders in a multi-tier custodial chain, however, relief at source is procedurally complex. The typical ADS holder does not have a direct relationship with the German custodian that withholds the tax. Instead, the chain of intermediaries runs as follows:
US ADS Holder → Broker (DTC Participant) → DTC → Meridian Trust Company, N.A. (Depositary) → German Sub-Custodian (via Ashgrove Enterprises Banking AG) → Halcyon's Dividend-Paying Bank
For the German custodian to apply the treaty rate at source, it must receive adequate documentation establishing that the ultimate beneficial owners of the dividends are treaty-eligible US residents. In a multi-tier chain, this documentation must be transmitted through each layer of the custodial structure — a process that is operationally challenging and requires coordinated arrangements among the intermediaries.
In practice, relief at source for ADR holders typically depends on whether Meridian Trust Company, N.A. (as depositary) has:
(a) A valid Qualified Intermediary (QI) agreement with the IRS that is recognized by German tax authorities for purposes of treaty benefit certification; and
(b) Established operational procedures with the German custodian to transmit pooled or individual treaty benefit claims in a format and with supporting documentation acceptable to the German custodian and the BZSt.
If Meridian Trust has a valid QI agreement and has made appropriate arrangements with the German custodian, it may be able to certify — on a pooled basis — that a specified percentage or dollar amount of the dividends is beneficially owned by treaty-eligible US persons. The German custodian can then apply the 15% rate to the certified portion of the dividends. This approach avoids the need for each individual ADS holder to file a separate claim with the BZSt and is the optimal outcome from both a tax efficiency and investor relations perspective.
The companion memorandum on the QI Analysis for Meridian Trust Company, N.A. addresses the QI-specific aspects of this analysis in detail. The results of that analysis will directly inform the prospectus disclosure and the Deposit Agreement provisions.
C. Refund Procedure
If the full statutory rate of 26.375% is withheld at source — either because relief at source is not available or because Meridian Trust has not established the necessary QI arrangements — US holders of Halcyon ADSs may file a refund claim with the BZSt to recover the excess withholding.
The refund claim requires the following documentation:
1. BZSt Refund Application Form. The BZSt prescribes a standard application form for refund claims (Antrag auf Erstattung der deutschen Kapitalertragsteuer). This form is typically available in German, although English-language versions may be available from the BZSt or through intermediary service providers. The form requires detailed information about the applicant, the paying company, the dividend amount, the tax withheld, and the treaty provision under which the refund is claimed.
2. Certificate of US Tax Residency — IRS Form 6166. The applicant must provide a valid IRS Form 6166 certifying that the applicant is a resident of the United States for purposes of the Treaty. The procedures for obtaining Form 6166 are described in Section V.D below.
3. Proof of Dividend Entitlement. The applicant must provide a dividend voucher (Dividendenabrechnung) or equivalent documentation evidencing that the applicant was the beneficial owner of the Halcyon shares (or, in the case of ADS holders, the ADSs) on the relevant record date and received (or was entitled to receive) the dividend in question. For ADS holders, this documentation would typically take the form of a brokerage account statement or a letter from the broker or Meridian Trust confirming the holder's entitlement.
4. Evidence of Beneficial Ownership. The applicant must provide documentation establishing that the applicant is the beneficial owner of the dividends — i.e., that the applicant bears the economic risk and reward of ownership and that the dividend income is attributable to the applicant for tax purposes. For most individual US ADS holders, this requirement is satisfied by the brokerage account statement together with the Form 6166.
5. Completed German Tax Forms. In addition to the BZSt refund application form, the BZSt may require the completion of additional German tax forms or questionnaires, including LOB questionnaires for entity holders.
Refund Timeline. Based on current BZSt processing practices, the refund of excess German withholding tax typically takes approximately six to eighteen months from the date a complete application is filed. The timeline can vary depending on the volume of claims being processed, the completeness of the submitted documentation, and any requests for additional information from the BZSt. In periods of high volume (e.g., following large dividend payments by major German companies with significant US investor bases), processing times may extend toward the upper end of this range.
Economic Impact. To illustrate the magnitude of the refund at issue, consider a hypothetical dividend of $1.00 per ADS (equivalent to $0.50 per ordinary share at the 1 ADS = 2 ordinary shares ratio). Under the statutory withholding rate, the German tax withheld would be $1.00 × 26.375% = $0.26375 per ADS. Under the treaty rate, the withholding would be $1.00 × 15% = $0.15 per ADS. The excess withholding eligible for refund is therefore $1.00 × (26.375% – 15%) = $0.11375 per ADS. For a US investor holding 10,000 ADSs, this represents a refund of $1,137.50 per dividend payment — a nontrivial amount that, combined with the six-to-eighteen-month processing delay, underscores the importance of achieving relief at source wherever possible.
Practical Considerations. The refund procedure is burdensome for individual retail investors, who may lack the resources, expertise, or motivation to navigate the BZSt application process, obtain IRS Form 6166, and assemble the required documentation. Institutional investors with dedicated tax departments are better positioned to pursue refund claims but will nonetheless prefer relief at source for cash flow and operational reasons. Coordination of the refund process through the depositary — either on a pooled basis under a QI arrangement or through a facilitation service — is therefore the preferred approach and should be explored with Meridian Trust.
D. IRS Form 6166 — Certificate of US Tax Residency
IRS Form 6166 is the official IRS certification of US tax residency that is accepted by foreign tax authorities — including the BZSt — as evidence that the holder is a resident of the United States for purposes of an applicable income tax treaty.
How to Obtain Form 6166. A US person (or the person's authorized agent) obtains Form 6166 by filing IRS Form 8802 (Application for United States Residency Certification) with the IRS. Form 8802 requires the applicant to provide identifying information (name, address, TIN), the name of the treaty country for which the certification is requested (Germany), and the tax year(s) covered.
Key parameters of the Form 6166 process are as follows:
• Filing Fee: $85 per applicant per request. The fee is non-refundable and must be paid by check or money order payable to the United States Treasury.
• Processing Time: Approximately six to twelve weeks from the date of receipt of a complete Form 8802 application. The IRS recommends filing at least 45 days before the certification is needed but, in practice, processing times may be longer during peak periods.
• Validity Period: Form 6166 is valid for the calendar year in which it is issued. Holders who wish to claim treaty benefits on dividends paid in successive calendar years must obtain a new Form 6166 for each year.
• Renewal. Because of the annual validity limitation, US holders must renew their Form 6166 each year by filing a new Form 8802.
Implications for ADS Holders. For US ADS holders pursuing individual refund claims with the BZSt, each holder must obtain their own Form 6166. The $85 filing fee, the six-to-twelve-week processing time, and the annual renewal requirement represent meaningful administrative and financial burdens, particularly for smaller retail investors. This further underscores the importance of arranging for relief at source through the depositary, which may — under a QI arrangement — be able to certify the treaty-eligible status of its US ADS holders on a pooled basis without requiring each individual holder to obtain and submit their own Form 6166.
The extent to which a QI-holding depositary can provide pooled certifications in lieu of individual Form 6166 submissions is discussed in Section VI.B below and in the companion QI memorandum.
VI. Coordination Through the Depositary-Custodian Chain
The practical effectiveness of the treaty benefit certification procedures depends on the operational coordination among the key intermediaries in the ADR dividend payment chain. This Section addresses the role of each intermediary and the arrangements that must be established to facilitate the reduced withholding rate for US ADS holders.
A. Role of Meridian Trust Company, N.A. as Depositary
Meridian Trust Company, N.A. occupies the central position in the ADR dividend distribution chain. As depositary under the Deposit Agreement, Meridian Trust is responsible for:
(a) Receiving dividends from the German custodian (net of any German withholding taxes deducted at source);
(b) Converting the euro-denominated dividend amounts to US dollars at the prevailing exchange rate;
(c) Deducting the applicable depositary fees, including the $0.05 per ADS per annum depositary service fee payable by ADS holders and any other fees and charges permitted under the Deposit Agreement; and
(d) Distributing the net US dollar dividend amounts to ADS holders through DTC.
Meridian Trust's ability to facilitate treaty benefits for US ADS holders depends critically on its QI status and the arrangements it has established with the German custodian. If Meridian Trust can certify to the German custodian that the beneficial owners of a specified portion of the dividends are treaty-eligible US persons, the German custodian may apply the 15% treaty rate at source to that portion, and Meridian Trust will receive — and distribute to its US ADS holders — a larger net dividend.
Patricia Novak, Vice President, Depositary Receipts, at Meridian Trust has been identified as the key operational contact for coordinating treaty benefit arrangements. As discussed in Section XI.C below, Calderwood & Harkness should request detailed information from Ms. Novak regarding Meridian Trust's current QI status, its standard operating procedures for facilitating German treaty benefits, and the identity and procedures of the German custodian.
B. QI Agreement and German Treaty Relief
The availability of relief at source through the depositary chain turns on whether Meridian Trust holds a valid QI agreement with the IRS and whether that agreement — in conjunction with the relevant bilateral treaty mechanisms and German administrative practices — enables Meridian Trust to provide pooled treaty benefit certifications to the German custodian.
If Meridian Trust holds a valid QI agreement:
The QI agreement, combined with the bilateral treaty network arrangements and the BZSt's administrative guidance on the treatment of QIs, may enable Meridian Trust to certify the treaty-eligible status of its US ADS holders on a pooled basis to the German custodian or withholding agent. Under such an arrangement:
• Meridian Trust would collect and maintain documentation from its account holders — Forms W-9 from US holders and Forms W-8BEN / W-8BEN-E from non-US holders — sufficient to determine the treaty eligibility of each holder.
• Based on this documentation, Meridian Trust would prepare a pooled certification (sometimes referred to as a "treaty statement" or "treaty claim") identifying the percentage or amount of the dividend payment that is beneficially owned by holders eligible for the 15% treaty rate (or, in the case of qualifying corporate holders, the 5% rate).
• Meridian Trust would transmit this certification to the German custodian in advance of (or contemporaneously with) the dividend payment.
• The German custodian, upon receipt of the QI-based certification, would apply the 15% treaty rate to the certified portion of the dividends and withhold the full 26.375% statutory rate only on the uncertified or non-treaty-eligible portion.
• This process would be repeated for each dividend payment cycle.
This approach would allow the German custodian to apply the 15% treaty rate at source, avoiding the need for individual US ADS holders to file separate refund claims with the BZSt. It is the most efficient and investor-friendly approach and should be the target outcome for the Halcyon ADR program.
If Meridian Trust does not have a QI agreement, or the QI agreement does not extend to German treaty claims:
If Meridian Trust does not hold a valid QI agreement, or if the scope of its QI agreement does not encompass the facilitation of German treaty benefit claims, then the German custodian will not have a basis for applying the reduced treaty rate at source on a pooled basis. In this scenario:
• The full statutory withholding rate of 26.375% will be applied to all dividend payments made to the German custodian on behalf of Meridian Trust.
• Each individual US ADS holder would be required to pursue a separate refund claim with the BZSt, following the procedures described in Section V.C above, including obtaining an individual IRS Form 6166, assembling the required documentation, and waiting six to eighteen months for processing.
• This outcome is materially worse for investors from both a cash flow perspective (the excess 11.375% is tied up during the refund period) and an administrative burden perspective (each holder must navigate the BZSt process individually or engage a tax advisor to do so).
• This outcome should be disclosed prominently in the prospectus — both in the taxation section and in the risk factors — so that investors can make an informed assessment of the after-tax return on their investment.
The companion memorandum on the QI Analysis for Meridian Trust Company, N.A. (see Appendix D, cross-reference) will provide a detailed analysis of Meridian Trust's current QI status and its implications for the Halcyon ADR program. The results of that analysis will be determinative of the treaty benefit approach described in the prospectus.
C. German Custodian Responsibilities
The German sub-custodian — to be appointed by Meridian Trust under the Deposit Agreement and expected to hold the deposited Halcyon ordinary shares through the Ashgrove Enterprises Banking AG settlement infrastructure — occupies a critical position in the withholding tax chain as the "last intermediary" before the German withholding agent.
Under German tax law, the German custodian (Depotbank) is responsible for the withholding and remittance of Kapitalertragsteuer on dividend payments credited to the accounts it maintains. Specifically:
• The German custodian is the entity that deducts the withholding tax from the gross dividend payment and remits it to the German tax authorities (Finanzamt).
• The German custodian is authorized to apply the reduced treaty rate — rather than the full statutory rate — only if it receives proper documentation and certification from the preceding intermediary in the chain (i.e., Meridian Trust, acting in its capacity as depositary and, if applicable, as QI).
• If the German custodian does not receive adequate treaty benefit documentation, it is obligated to withhold at the full statutory rate of 26.375%. There is no discretion to reduce the withholding absent proper documentation.
Operational Arrangements. It is essential that the operational arrangements between Meridian Trust and the German custodian be established prior to the first dividend payment following the IPO. These arrangements should specify:
(i) The format and content of the treaty benefit certifications that Meridian Trust will provide to the German custodian;
(ii) The timeline for submission of such certifications relative to the dividend record date and payment date;
(iii) The custodian's procedures for applying the reduced treaty rate on the basis of Meridian Trust's certifications;
(iv) The custodian's recordkeeping and reporting obligations;
(v) Procedures for the custodian to request additional documentation or clarification from Meridian Trust; and
(vi) Fallback procedures in the event that certifications are not received in a timely manner.
German Counsel Consultation. Bähr Stein Rechtsanwälte — specifically Dr. Christoph Maurelban and Johanna Weiß — should be consulted on the specific German regulatory and administrative requirements governing the German custodian's treaty-rate application procedures. Their guidance will be essential to ensuring that the operational arrangements conform to current BZSt requirements and German tax law. In particular, German counsel should advise on:
• The current BZSt administrative practice regarding the acceptance of QI-based pooled certifications from non-German intermediaries;
• Any recent changes to German legislation or BZSt guidance affecting the depositary receipt treaty claim process;
• The specific requirements for the Ashgrove Enterprises Banking AG settlement and the interaction between the Ashgrove Enterprises infrastructure and the withholding tax procedures; and
• The documentation that the German custodian will require from Meridian Trust in order to apply the reduced treaty rate.
D. DTC Participant / Broker Layer
The vast majority of US ADS holders will hold their ADSs through brokers, banks, and other financial intermediaries that are participants in DTC. These DTC participants play an important role in the documentation chain:
(a) Documentation Collection. DTC participants must collect Forms W-9 from their US ADS holder clients and Forms W-8BEN / W-8BEN-E from their non-US ADS holder clients. These forms must be properly completed, valid, and maintained in the DTC participant's records.
(b) Documentation Transmission. DTC participants must transmit the relevant documentation — or the information derived therefrom — to Meridian Trust, either directly or through DTC's systems, to enable Meridian Trust to compile the pooled treaty benefit certifications provided to the German custodian.
(c) DTC Tax Relief Service. DTC operates a Tax Relief Service that may be utilized to facilitate treaty benefit claims in a streamlined manner. The DTC Tax Relief Service allows DTC participants to submit treaty benefit claims electronically on behalf of their clients, and DTC aggregates these claims and transmits them to the depositary. The effectiveness of this process in the context of the Halcyon ADR program depends on the specific arrangements between Meridian Trust and DTC, including whether Meridian Trust elects to utilize the DTC Tax Relief Service and whether the service supports German treaty benefit claims for ADR programs.
The effectiveness of the DTC participant layer depends on the DTC participants' diligence in collecting and transmitting accurate documentation and on the operational coordination between DTC and Meridian Trust. Any gaps or delays in the documentation chain at this level could impair the depositary's ability to provide timely pooled certifications to the German custodian, potentially resulting in the application of the full statutory withholding rate.
VII. Prospectus Disclosure Recommendations
Based on the analysis set forth in this memorandum, we recommend the following disclosures in the draft prospectus (Form F-1) for the Halcyon IPO.
A. German Withholding Tax Disclosure
The prospectus taxation section — which is being prepared as a separate draft by Leonard Cross with input from Bähr Stein Rechtsanwälte on German tax matters — must clearly and completely disclose the following:
(a) Statutory German Withholding Rate. The statutory German withholding tax rate applicable to dividends paid by Halcyon on the ordinary shares underlying the ADSs is 26.375% (consisting of 25% Kapitalertragsteuer plus 5.5% Solidaritätszuschlag thereon).
(b) Treaty-Reduced Rate for Eligible US Holders. Under Article 10 of the US-Germany Income Tax Treaty, US holders who are the beneficial owners of the dividends and who satisfy the applicable LOB requirements may be eligible for a reduced withholding rate of 15% (or, in the case of qualifying corporate holders owning at least 10% of the voting power, 5%).
(c) Procedures for Claiming the Reduced Rate. The prospectus should describe both the relief-at-source procedure and the refund procedure, including a clear explanation of the documentation requirements (IRS Form 6166, BZSt application forms, dividend vouchers, and beneficial ownership certifications) and the expected timeline for refunds (six to eighteen months).
(d) Risk of Full Statutory Withholding. The prospectus should prominently disclose the risk that the full statutory rate of 26.375% may be withheld if the ADS holder does not provide proper documentation in a timely manner, or if the depositary has not established arrangements with the German custodian to facilitate relief at source.
(e) Role of Meridian Trust as Depositary. The prospectus should describe the role of Meridian Trust Company, N.A. as depositary in the dividend distribution chain and any limitations on the depositary's ability to facilitate treaty relief for US ADS holders. This disclosure should be drafted in a manner that accurately sets expectations without creating a perception that Meridian Trust guarantees treaty benefits.
B. Risk Factor Considerations
The risk factors section of the prospectus should include one or more risk factors addressing taxation-related risks, specifically:
(a) Timeliness of Treaty Benefits. US holders may not be able to obtain the reduced treaty rate on a timely basis, particularly if the depositary has not established arrangements for relief at source. In such cases, the full 26.375% statutory rate may be withheld, and holders may need to pursue individual refund claims with the BZSt.
(b) Burden and Expense of Refund Process. The refund procedure may be time-consuming (typically six to eighteen months) and may involve costs, including the $85 filing fee for IRS Form 6166 and professional advisory fees.
(c) Changes in Law or Administrative Practice. Changes in German tax law, BZSt administrative practices, or the interpretation of the Treaty could adversely affect the availability of treaty benefits for US ADS holders.
(d) LOB Limitations. The LOB provisions of the Treaty may limit or deny treaty benefits for certain categories of US holders, including certain corporate and institutional holders that do not satisfy one of the qualifying tests under Article 28.
C. PFIC Interaction
The prospectus should cross-reference the Passive Foreign Investment Company ("PFIC") analysis and include appropriate cautionary language. The preliminary conclusion set forth in the companion PFIC analysis memorandum is that Halcyon is not a PFIC, on the basis that Halcyon satisfies the active business exception — specifically, less than 25% of Halcyon's gross income constitutes passive income, and less than 50% of Halcyon's assets consist of passive assets, in each case as determined under the applicable PFIC testing rules.
However, the prospectus should include cautionary language noting that:
(a) PFIC status is determined annually based on the composition of the company's income and assets, and there can be no assurance that Halcyon will not be classified as a PFIC for any future taxable year;
(b) If Halcyon were classified as a PFIC, the US federal income tax consequences to US ADS holders would differ materially, including the potential application of the "excess distribution" rules under IRC Section 1291, which impose an interest charge and treat gains as ordinary income; and
(c) PFIC classification could affect the availability or utility of foreign tax credits for German withholding taxes paid on Halcyon dividends, as the foreign tax credit rules interact with the PFIC regime in ways that may limit the creditability of the German taxes.
VIII. US Foreign Tax Credit Considerations
US holders of Halcyon ADSs will need to take into account the US foreign tax credit rules in determining the net US federal income tax consequences of German withholding taxes paid on Halcyon dividends. This Section provides an overview of the relevant considerations.
A. Creditability of German Withholding Tax
US holders may generally claim a credit against their US federal income tax liability for German withholding taxes paid (or accrued) on Halcyon dividends, subject to the limitations imposed by IRC Section 904 and the related Treasury Regulations. The foreign tax credit is the primary mechanism by which the United States mitigates the double taxation that would otherwise result from the imposition of both German withholding tax and US income tax on the same dividend income.
The credit is available whether the German tax is withheld at the statutory rate (26.375%) or the treaty-reduced rate (15%). However, the creditability of the German tax may be limited in the following circumstances: