The German Act on the Adaption of Investment Fund Taxation in
Connection with the AIFM Directive (the "AIFM Tax
Act") did not pass the legislative process prior to
the Federal Election. Initially, it was envisaged that the AIFM Tax
Act should enter into force on 22 July 2013.
The AIFM Tax Act failed due to a dissent regarding the so-called
pension asset pooling.
Some States brought a new draft of the AIFM Tax Act to the
Federal Council (Bundesrat). The Federal Council
(Bundesrat) is to initiate a new legislative process. The
new draft shall be classified as "urgent matter".
The new draft is substantially similar to the previous AIFM Tax
Act that failed prior to the Federal Election. Below we summarized
certain material points of the new draft:
1. Qualifying Investment Funds
The definition of the term "qualifying investment
funds" is identical to the respective definition in the
previous AIFM Tax Act (as drafted by the resolution of the German
Bundestag on 16 May 2013). The criteria that have to be
satisfied for a fund to qualify as "qualifying investment
fund" have been inserted in the new draft without any changes,
Only shares in companies qualify as eligible assets for
"qualifying investment funds" (cf. our client info dated
31 January 2013).
Other types of business participations such as interests in
limited partnerships that will have been acquired prior to the
future resolution of the German Bundestag on the new draft are
subject to an unlimited grandfathering.
2. Non-Qualifying Investment Funds
The tax regime applicable to non-qualifying investment funds
(both partnership-type and corporate-type) remains unaffected.
Non-German asset pools of a contractual type such as Luxembourg
FCPs, French FCPRs or an Italian Fondo Chiuso have to face a
re-classification as opaque for German tax purposes. If they do not
satisfy the criteria for qualifying investment funds (only
investments in eligible assets cf. section 1 above) they will
be treated as corporate-type non-qualifying investment funds.
Until now the draft does not have a transitional rule, i.e. the
re-classification would occur when the new act enters into force.
Due to the current draft it is possible that this may happen at a
given date during the calendar year (as opposed to year end).
The very controversial mandatory lump-sum taxation for
corporate-type non-qualifying investment funds is not part of the
3. Transitional Rules/Grandfathering
Under the new draft the provisions of the AIFM Tax Act shall
enter into force after the Act was published in the Federal
Bulletin. Thus, there is no retroactive entry into force as
discussed in more detail in our client info dated
4. September 2013. Particular attention has to be paid on
the following issues:
The grandfathering rules for pre-existing regulated investment
funds (within the scope of the German Investment Funds Act as in
force on 21 July 2013) are also part of the new draft.
However, the grandfathering period was not extended (due to the
delay in the legislative process). Rather, the grandfathering
period is still limited to the end of the business year ending
after 22 July 2016. This means that pre-existing regulated
investment funds have to comply with the criteria for qualifying
investment funds (cf. section 1 above) as of 2016/2017.
Although not expressly stated in its provisions, it seems to be
the intention of the new draft that the grandfathering provisions
shall also apply to pre-existing regulated investment funds that
have been established after 21 July 2013 and prior to entering
into force of the new AIFM Tax Act. We will address this issue
during the legislative process with the objective to clarify the
wording of the draft.
There are no grandfathering or transitional rules planned for
non-qualifying investment funds. Such funds would be subject to the
new law as of its entry into force. It cannot be determined when
the new law will enter into force. The best case would be to
complete the legislative process until 1 January 2014.
However, it is possible that the new AIFM Tax Act will enter into
force on a given date during year 2014. This will have an impact on
the re-classification of certain non-German vehicles for German tax
purposes (cf. section 2 above).
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