Fund Taxation Alert 2017-10 | KPMG | LU

Fund Taxation Alert 2017-10

Fund Taxation Alert 2017-10

The German Federal Ministry of Finance (BMF) published a letter in which they clarified certain outstanding queries relating to their prior draft (GZ: IV C 1 – S 1980-1/16/10010 :001)

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We would like to announce that on 14 June 2017, the German Federal Ministry of Finance (BMF) published a letter in which they clarified certain outstanding queries relating to their prior draft (GZ: IV C 1 – S 1980-1/16/10010 :001)

Most notably, the BMF concretized the determination of the applicable partial exemptions for investment funds, the definition of equity participations, and the calculation of the real estate ratio:

  • The circular determines further transition rules until 31.12.2018.
  • Investment funds are granted time to change their investment restrictions until calendar year end 2018 by a self-declaration of their applicable partial exemptions, in cases where it cannot be determined from their investment restrictions.
  • More clarification regarding the determination and publication of the equity ratio
  • The statutory criteria of the “continuous investment” is defined as the daily compliance of the sought asset composition. Moreover, funds which are newly launched or in liquidation are subject to a substantial relieving in regards to the aforementioned statutory criteria.
  • The letter differentiates between a short-term underrun, for example a passive compliance breach, and an essential violation of the asset composition. The former is harmless in cases of immediate countermeasure, whereas the latter results in a loss of status as an equity or mixed fund. A violation must be reported immediately to the appropriate taxation authority.
  • The circular further states that, in general, the active asset is the relevant basis for the respective equity/real estate ratio calculations. Exceptions exist in which funds can base these calculations on the Net Asset Value, e.g. in case of certain credit restrictions for AIFs/OGAWs.
  • For the equity participation ratio of funds of funds, the circular further confirms that the calculations of the target funds are based on the minimum ratio in their investment restrictions. However, it cannot be criticized if the calculation is based on daily published equity participation ratios of the target funds.
  • The new letter confirms for foreign investment funds that a predominant investment statement (more than 50%) within their investment condition is sufficient to qualify for the classification as an equity fund.
  • The letter provides further definitions of equity participations. According to the new law, financial derivatives, for instance equity swaps, do not comply as equity participations, nor do REIT-corporations/partnerships.
  • Finally, further explanations on the real estate participation ratios are given. Among others, the real estate ratio eligible for active assets is defined.

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The KPMG German Investment Fund Tax Map (GIFT Map)

Please feel free to contact our specialized Team for all questions regarding the German Investment Fund Tax Reform.

Jonathan Streicher
Director
Fund Tax Center of Excellence
+352 22 51 51 7941
jonathan.streicher@kpmg.lu


Francesca Schmitt
Assistant Manager
+352 22 51 51 7401
francesca.schmitt@kpmg.lu


Monique Dupré
Assistant Manager
+352 22 51 51 7207
monique.dupre@kpmg.lu

 


International Fund Tax Services

Björn Ruppenthal
Partner
+352 22 51 51 6651
bjoern.ruppenthal@kpmg.lu


Corinna Goldkuhle

Associate Partner
+352 22 51 51 7935
corinna.goldkuhle@kpmg.lu

 

Jonathan Streicher
Director
Fund Tax Center of Excellence
+352 22 51 51 7941
jonathan.streicher@kpmg.lu

Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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