Tax & Legal

On 15 November 2024 the Federal Ministry of Finance (MoF) has published the draft of an explanatory circular on various issues relating to the tax treatment of fund establishment costs and has sent a corresponding draft circular to certain associations to comment by 12 December 2024.

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.

On Thursday, 16 November 2023, the Bundestag will vote on the Federal Government's bill to finance future-proof investments.

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 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).

The finance ministry has clarified that its decree of February 4, 2015 on the documentation requirements to be met by resident investors in non-transparent foreign investment funds applies to funds located in other EEA countries only.

The ECJ has held that a German provision for the taxation of deemed income from foreign investment funds outside the EU that do not comply with the German disclosure requirements falls under the “grandfather” clause of Art 64 of the TFEU allowing restrictions on the free movement of capital to and from third countries on December 31, 1993 to continue in force.

The finance ministry has published a list of documents to be produced by unit holders in “non-transparent” investment funds if they wish to avoid taxation on punitive deemed income.

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.

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 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.

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.

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.

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.