German Act On The Adaption Of Investment Fund Taxation In Connection With AIFM-D Ceased Finally

Author:Mr Uwe Bärenz, Ronald Buge and Jens Steinmüller
Profession:P+P Pöllath + Partners
  1. AIFM Tax Act

    In our Client Information dated 28 June 2013 we provided information that negotiations on the German Act on the Adaption of Investment Fund Taxation in Connection with the AIFM Directive (the "AIFM Tax Act") had temporarily halted. Now, the negotiations of the Conciliation Committee (Vermittlungsausschuss) have ceased altogether. Accordingly, it is highly unlikely that the legislative process regarding the AIFM Tax Act can be completed prior to the Federal Election on 22 September 2013.

  2. Impact

    The material consequences of the failure of the AIFM Tax Act are as follows:

    1. Transitional Order of the German Federal Ministry of Finance

      The Financial Authorities introduced certain transitional rules by way of a ministerial circular dated 18 July 2013 (BStBl. I 2013, p. 899). Under this circular the abolished German Investment Funds Act (Investmentgesetz) is deemed to remain in force solely for tax purposes after 21 July 2013.

    2. Preexisting Regulated Investment Funds

      Although it is uncertain whether this transitional rule is consistent with the German law, we expect no adverse tax consequences under the German Investment Funds Tax Act (Investmentsteuergesetz) for preexisting regulated investment funds and their investors.

    3. Closed-End Funds

      The tax treatment of closed-end funds such as private equity and infrastructure funds that did not fall within the scope of the abolished German Investment Funds Act so far should not be affected by the failure of the legislative process regarding the AIFM Tax Act.

    4. FCP, FCPR, Fondo Chiuso

      The classification of certain asset pools of a contractual type such as Luxembourg FCPs, French FCPRs or an Italian Fondo Chiuso for German tax purposes should remain unaffected. There should be no risk of a taxable event due to a change in the classification for German tax purposes (transparent vs. opaque) for the time being.

    5. Participation Exemption

      The so-called participation exemption (i.e. exemption for dividends and capital gains pursuant to § 8b of the German Corporate Income Tax Act) remains in effect (to the extent applicable) with respect to income from shares in closed-end funds organized as companies (e.g. Luxembourg S.A. SICAV-SIF).

    6. Specialized Investment Funds

      Specialized investment funds need not comply with the new set of criteria for Qualifying Investment Funds proposed to be introduced by the AIFM Tax Act for the time being. Rather, specialized investment funds may continue to invest in...

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