On 25 August 2023, the Federal Ministry of Finance (MoF) issued a circular on the transfer of assets from an investment fund within the meaning of Chapter 2 of the Investment Tax Act to a new investment fund as part of a spin-off.
The ECJ has held that investment consultancy services to an investment management company operating a retail investment trust fund are free of VAT as investment fund management services.
An ECJ advocate general has suggested the court rule the German rules for “penalty” taxation on a unit holder of a foreign investment fund to be an unjustified hindrance on the investor’s freedom of capital movement.
According to the ruling of the Supreme Tax Court published on 28 August 2025, taxation under the Investment Tax Act 2004 represents the final tax burden and for private investors it takes precedence over taxation under the general provisions. This also hinders a fund's capital investments being allocate to the shareholder under Section 39 (2) No. 1 of the Tax Code.
The finance ministry has extended the period to the first accounting years ending after July 20, 2016 in which foreign investment trusts doing business in Germany on December 22, 2008, but that no longer meet the formal German registration requirements continue to be treated as though they were still recognised, provided they continue to publish their accounts in the prescribed form.
The ECJ has held that an employer pension fund is not a “special investment fund” within the meaning of the VAT Directive; thus management charges to it are subject to VAT as an ordinary service.
The Supreme Tax Court has held that a loss incurred on an investment project of a closed-circle investment fund can be deducted by investors from their other income if the loss was not pre-planned and factored into the fund’s yield calculations.
The Italian Supreme Court issued seven important judgments in which it ruled that Italian withholding taxes levied on dividends distributed to a German investment fund and six US investment funds are in violation of the EU principles on the free movement of capital (Article 63 (TFEU).
In a most recent decision, the Supreme Tax Court held that a foreign investment fund who received dividends from domestic stock corporations which were subject to tax withholding (capital gains tax) under the 2004 Investment Tax Act is in general entitled to a refund of this tax under the principles of EU law.
The Supreme Tax Court decided that the portfolio dividends received by the controlled company within a tax group from domestic and foreign corporations via an investment fund are subject to trade tax in full. A deduction of foreign withholding taxes in accordance with Section 34c (2) of the German Income Tax Act is not possible when determining the trade income tax basis of the tax consolidation group (Organschaft).
The Supreme Tax Court has held the 80% deduction from income chargeable to trade tax from shipping operations in international waters to be available regardless of a short or long term intention to continue the operation. If, however, the ship had already been sold prior to commissioning, the capital gain is not derived from an international operation and is chargeable to trade tax in full.
The Supreme Tax Court has held that internal or other restrictions on the excise of ownership rights do not obviate an association by common shareholding of more than 25%. It has also held that the application of the transfer pricing documentation rules to cross-border transactions only is, while discriminatory, justified by the need to protect tax revenue.
Based on the German tax provisions existing in the years in dispute 2008 through 2010, resident and non-resident special real estate funds are treated differently, which is disadvantageous for non-resident special real estate funds. In its decision the ECJ sees a restriction on the free movement of capital which cannot be justified by overriding reasons of public interest.
The Supreme Tax Court has held that units held in unquoted investment funds holding shares should be written down to their redemption price at year-end or, if not freely disposable, to their issue price.
The Supreme Tax Court has asked the ECJ to rule on whether the fees charged to a fund by an investment consultant for specific disposition recommendations are free of VAT as fund management.
The finance ministry has published a decree asking tax offices to reject brokered bond stripping schemes between German and Luxembourg investment funds abusing the treaty protection of dividends.
The ECJ has rejected the estimated taxation of “non-transparent” investment funds as excessive taxation hindering the freedom of capital movement on shares held in foreign investment funds that do not report und publish their results in Germany in accordance with German law.
