Taxation of Investment Funds in Germany

Taxation of Investment Funds in Germany

Updated on Tuesday 21st June 2016

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Taxation-of-Investment-Funds-in-Germany.pngForeign businessmen who are interested in setting up an investment fund should know that the European Union (EU) provides an attractive legal environment, but several countries within the EU are known for their high quality services applicable to this industry. Germany is one of the most developed economies in this sense and it is advisable to open a fund here and one of the main reasons refers to the taxation system applicable to this type of business establishment. Our team of German lawyers can offer assistance on the tax level applicable to each type of fund


Taxation system applicable to German funds 

At the moment, the taxation regulations applicable to German funds are going through important changes, which will enter into force starting with 1st of January 2018. The Investment Taxation Reform Act is a proposed governmental act, which will improve the current tax legislation applicable to funds in Germany
One of the most important provisions of the Act refers to the participation exemption to shareholding, which will be applicable at the rate of 10%. 
The new Act can be comprised in two main parts, which refer to a transparent taxation system, applicable to UCITS and alternative investment funds, and a semi-transparent taxation system, available for special investment funds; our team of German attorneys can provide more details on the types of funds available here. 

Taxes applicable to German funds 

One of the proposed regulations refers to the abolition of the tax reporting requirements applicable to investment funds. Information which has to be presented in the Federal Gazette, such as the deemed distributed income, will no longer be necessary, due to the costs involved. 
Both German and foreign investment funds with activities in Germany will be imposed with a 15% tax on income. The same rate will be applicable to German dividends
Under the new Act, the local authorities have also changed the meaning of the investment funds, which will also take into consideration single investment funds, as well as non-commercial bodies which are not subjected to taxation
Businessmen who need to receive further information on the taxation applicable to investment funds can address to our German law firm for more details.