Germany: Proposals for investment taxation, disposals of portfolio investments

Germany: Investment taxation, portfolio investments

Germany’s Federal Ministry of Finance in late July 2015 released a discussion draft of a law for the reform of investment taxation. The discussion draft includes measures for fundamental reform of Germany’s investment taxation regime and a provision on the tax liability relating to gains on the disposal of portfolio investments.

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Summary

The proposed reform concerning investment taxation (Investmentsteuerreform) would apply to investment funds—defined as any capital investment vehicles that are subject to the supervisory provisions of the German investment law or comparable foreign investment vehicles—and their investors. 

Under the discussion draft, closed-ended investment funds—such as investment companies issuing a fixed number of shares, or closed-ended investment limited partnerships—or comparable foreign investment vehicles would be covered by the investment tax law. However, partnerships would only be within the scope of the changes if their “corporate purpose” serves directly and exclusively the coverage of obligations in connection with the “pension asset pooling” plans. The current fiscal investment restrictions for investment funds would be waived, at least for mutual funds.

The change would be intended to provide a new “intrasparent” tax system for the taxation of investment funds and their investors. In other words, this would allow for separate taxation of investment funds and investors.  For example, there would be a new “advance flat fee” on “fictitious” taxable income, on which the investor would pay taxes so as to avoid an unlimited (in terms of timing) deferral.

 

Read a 2015 report [PDF 1.67 MB] prepared by the KPMG member firm in Germany: German Tax Monthly (September 2015)

This KPMG report also includes discussions of:

  • A federal constitutional court case finding as unconstitutional the auxiliary basis of assessment of the property transfer tax law
  • The treatment of selling costs and purchase price changes 
  • Updates on the exchange of tax information agreements, administrative cooperation agreements

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