The two Divizend founders Thomas Rappold and Julian Nalenz.
© Divizend

Divizend Helps Private Investors Reclaim Taxes

Tax law is a complicated matter, and the stock market is no exception. Dividends from foreign stocks, for example, are taxed twice: once with the foreign withholding tax and then again with domestic income tax. While it is possible for investors to have this refunded, the process is complex and far from standardized. Founded in 2019, the Munich-based startup Divizend has developed a solution to the problem that has already garnered praise from investors. We spoke with the founders.

Munich Startup: Who are you and what does Divizend do? Please introduce yourselves!

Divizend: Our B2C software helps private investors reclaim their tax money by automating the process of refunding withholding tax. Divizend is the first fintech company in the world that is working on this kind of innovative service and digitizing it in a particularly user-friendly and cost-effective way. With our holistic approach, which is communicated by our claim of “Find, Act, Maximize,” Divizend’s platform will be the key place for investors in the future who are striving to earn high dividends, because it will be the place to check for the most relevant research findings, analyses and tax services.

Unicorn founders and a “Game of Thrones” algorithm

Thomas Rappold, Divizend CEO and co-founder, worked for Allianz and Credit Suisse, has more than 20 years of experience in fintech and is co-founder of the fintech unicorn Numbrs. He has in-depth knowledge of wealthtech and open banking APIs like PSD2. Moreover, he is the author of tech investment bestsellers like “Silicon Valley Investing” and often appears online, in print media and on TV as a technology investment expert for a renowned finance magazine.

Julian Nalenz, B.Sc. in computer science from TU Munich, Divizend CTO and co-founder, has been a very active member of the startup scene for years, particularly in Munich (ObjectBox, CQSE). In 2019, he was the main developer of the fundamental machine learning algorithms of a university seminar that was studying the question as to how long the “Game of Thrones” characters would live. The final results were reported about in many international newspapers as well as in other media.

The founding team came together in mid-2019 through university and software development projects in the field of fintech and also through the Munich meet-up scene.

Munich Startup: What problem does your startup solve?

Divizend: Dividends from foreign stocks are taxed twice: the first time with foreign withholding tax and the second time with domestic income tax. At the moment, refunds are largely a missed opportunity due to formal complexity, technical challenges and a lack of standardization. The European Union has been striving to create a single set of rules for decades, but has yet to establish a standardized process.

Divizend is now the world’s first wealthtax fintech that offers a digital platform for the automatic claiming of foreign withholding tax on dividends for private investors, which solves a real customer problem that has existed for quite some time. At the moment, this means an annual market volume of 90 billion dollars of withholding tax paid on cross-border stocks, 18 billion dollars of which are not reclaimed.

Divizend solves problems for banks and tax software

Munich Startup: But that’s nothing out of the box!

Divizend: In general, banks are under a lot of pressure both in terms of regulations and costs. Under these conditions, it wouldn’t be profitable for a single bank to develop a proprietary solution for refunds. And that’s why many banks are interested in working with Divizend. Tax software companies have similar problems and developing a solution like the one offered by Divizend would be too specific for them to develop on their own. Ultimately, other startups don’t have the necessary know-how, because implementing this kind of solution requires extensive technical expertise as well as domain-specific knowledge about tax issues and stocks.

Because we’re a deeptech startup, we developed our entire system of unique technical key components ourselves in order to give our customers only top quality products. We’re currently developing the following modules:

  • The first digital B2C platform for reclaiming foreign withholding tax on dividends
  • The first international stock aggregation API to generalize banks’ stock APIs
  • The first international, graph-based securities database
  • The first interactive dividend screener

Munich Startup: Was there a point when you nearly failed?

Divizend: On the contrary: Divizend has already received overwhelmingly positive feedback, both from public investors and from strategic and well-known individuals in the world of finance and in the media. Furthermore, our success in competitions and incubators like the European Data Incubator, the EY Start-up Academy, the REACH Incubator and the Munich Business Plan Competition have shown that were are pursuing and resolutely implementing an exceptional business idea.

“Our major goal is going public”

Munich Startup: Where would you like to be in one year, and where in five years?

Divizend: By the end of 2021, we want to have completed Series A funding amounting to two to five million euros. Based on our existing partnerships, we’re expecting a turnover of 1.5 million euros in 2021, 3 million in 2022 and finally 40 million euros in 2025. We will then be ready for our major goal of going public. Moreover, in the months and years ahead, we plan to establish further partnerships with leading banks, stock markets, finance portals and national tax authorities. In terms of our international expansion, we plan to launch our services in 2021 in Europe, 2022/23 in North America and in 2024/25 in Asia and Australia.

Munich Startup: What do you think about Munich as a startup location?

Divizend: We see the Munich startup scene as one of the most exciting ecosystems in Europe, especially due to the dense network of universities, investors, meet-ups, other startups and tech companies. We’re already successfully collaborating on an R&D level with departments at TUM and LMU. After all, we still see major and steadily growing potential for Divizend here, and that includes future key technologies and initiatives such as artificial intelligence and “Munich Quantum Valley.”

Munich Startup: Risk or security?

Divizend: The former FC Bayern coach Otto Rehhagel coined the term “controlled offensive” and was very successful with it. This is also the motto we live by as a startup and are convinced that the combination of risk and security will lead to our long-term and sustainable success.