Circular Of German Federal Ministry Of Finance Regarding AIFM Tax Act


On 23 April 2014 the German Federal Ministry of Finance released a circular regarding certain open issues in connection with the AIFM Tax Act (the "Circular").

In particular, the Circular deals with eligible assets for qualifying investment funds. Hence, the Circular is important for specialized investment funds that invest in closed-end funds such as private equity and infrastructure funds.

  1. Executive Summary

    The statements in the Circular that are most relevant for investments of specialized investment funds in closed-end funds can be summarized as follows:

    1. Generally, partnership interests are still eligible assets for specialized investment funds subject to certain restrictions.

    2. Shares in corporations are still eligible assets subject to the pre-existing rules. However, in the future a specialized investment fund may only hold shares that represent less than 10% of the share capital of the corporation.

    3. If assets qualify as "securities" for regulatory purposes such qualification also applies for tax purposes. Hence, specialized investment fund may invest in certain assets that would otherwise not be eligible e.g. due to the legal form of the underlying investment.

  2. Partnerships

    Generally, interests in closed-end funds organized as partnerships are still eligible for specialized investment funds. In the future a distinction has to be made between non-business and business partnerships.

    1. Non-Business Partnership

      The Circular clarifies that interests in non-business partnerships are, in principle, eligible for qualifying investment funds. Whether or not such interest is an eligible asset must be determined on a look-through approach, i.e. it depends on the assets held by the partnership.

      With respect to investments in private equity funds organized as non-business partnership a specialized investment fund particularly must make sure when making such investment that the restrictions for an investment in corporations are satisfied (cf. section III below) to the extent such private equity fund holds shares of corporations.

    2. Business Partnership and 10% Threshold

      Interests in business (including deemed business) partnerships still can be acquired within the threshold for non-eligible assets, i.e. up to 10% of the value of a specialized investment fund.

  3. Shares of a Corporation

    1. Corporate Type Non-Qualifying Investment Funds

      Under the circular closed-end funds organized as corporations (so-called corporate-type non-qualifying...

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