In P+P's Client Information dated 12 December 2012 and 31 January 2013 we provided information about the drafts of a German Act on the Adaption of Investment Fund Taxation in Connection with the AIFM Directive (the "Act"). In the meantime the Act has passed the German Parliament (Bundestag). However, the Federal Council (Bundesrat) submitted the Act to the Conciliation Committee (Vermittlungsausschuss). Yet, negotiations in the Conciliation Committee (Vermittlungsausschuss) ceased on 26 June 2013.

The issue was a dissent regarding the so called pension asset pooling. This is not directly linked to the implementation of the AIFM Directive into German law. The very controversial mandatory lump-sum taxation (which is no longer part of the Act) was not the cause of a halt in the negotiations.

I. Impact

The Act will not obtain the necessary consent of the Federal Council (Bundesrat) before the Capital Investment Code (Kapitalanlagegesetzbuch) enters into force.

Under the current timelines of the German Parliament (Bundestag) and the Federal Council (Bundesrat) the legislative process may be completed prior to the federal election (Bundestagswahl), which takes place on 22 September 2013. However, in this case or if the Act passes both chambers of the parliament at a later date it is possible that the Act will enter into force with retroactive effect as of 22 July 2013.

If the legislative process cannot be completed prior to the federal election, the Act dies. Should this occur the legislative process must be fully restarted and the Act will need to obtain consent again from the new German Parliament (Bundestag) and the Federal Council (Bundesrat).

II. Transitional Rules introduced by the German Federal Ministry of Finance

The Federal Ministry of Finance introduced certain transitional rules by way of a ministerial circular. Under this circular the German Investment Funds Act (Investmentgesetz) which will be abolished as of 22 July 2013 is deemed to remain into force solely for tax purposes.

This means:

  • The German Investment Funds Tax Act (Investmentsteuergesetz) still applies to investment funds which qualify as such under the German Investment Funds Act (Investmentgesetz) after 21 July 2013.
  • Investment funds that are established after 21 July 2013 but qualify as investment funds under the (then abolished) German Investment Funds Act (Investmentgesetz) still fall within the scope of the German Investment Funds Tax Act (Investmentsteuergesetz).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.