In our Client Information dated 30 April 2014 we provided information on a Circular dated 23 April 2014 released by the German Federal Ministry of Finance regarding certain open issues in connection with the AIFM Tax Act. On 4 June 2014 the German Federal Ministry of Finance released an update to this Circular.

The Circular has been amended with respect to the following issues:

1. Shares of Corporations as Eligible Assets

In the original Circular dated 23 April 2014 the German Federal Ministry of Finance held the view that shares of a corporation only qualify as eligible assets for a qualifying investment fund if the respective corporation operates an "active business". There was reasonable doubt whether this is in line with the statutory requirements (cf. section III. 2 of our Client Information dated 30 April 2014). In the updated Circular the respective wording has been deleted. Accordingly, shares of corporations qualify as eligible assets irrespective of whether the respective corporation is "active" or "passive".

2. Scope of 10% Threshold

Under the new German Investment Tax Act a qualifying investment fund may only hold shares that represent less than 10% of the share capital of the corporation. It was not entirely clear whether this requirement is also applicable to shares that are quoted on a recognized stock exchange. Such shares typically qualify as "securities" which qualify as eligible assets without any additional restrictions. However, under the updated Circular the 10% threshold is applicable for both public and private corporations.

3. Open Issues

There are no further amendments to the Circular. In particular, the updated Circular does not deal with open issues in connection with non-qualifying investment funds which are important for closed-end funds.

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.