Investment Tax Act (Germany)

Basic data
Title:	Investment Tax Act
Abbreviation:	Investment Tax Act
Type:	Federal law
Scope:	Federal Republic of Germany
Legal matter:	Tax law
References :	610-6-18
Original version from:	December 15, 2003 ( BGBl. I p. 2676 )
Entry into force on:	predominantly January 1, 2004
Last revision from:	Art. 1 G of 19 July 2016 ( Federal Law Gazette I p. 1730 )
Entry into force of the new version on:	January 1, 2018 (Art. 11 G of July 19, 2016)
Last change by:	Art. 17 G of December 12, 2019 ( Federal Law Gazette I pp. 2451, 2475 )
Effective date of the last change:	December 18, 2019 (Art. 39 G of December 12, 2019)
GESTA :	D043
Please note the note on the applicable legal version.

The Investment Tax Act in Germany regulates the taxation of investment funds .

With the announcement of the law on the reform of investment taxation (Investment Tax Reform Act, InvStRefG), a fundamental reform of investment taxation will come into force on January 1, 2018. While Art. 2 of the Investment Tax Reform Act introduces various changes to the old Investment Tax Act that was in force until December 31, 2017, Art. 1 of the Investment Tax Reform Act represents a complete revision of the Investment Tax Act from January 1, 2018.

Investment Tax Act 2017 (Art. 2 G of 19 July 2016)

In the Investment Tax Act (InvStG), the tax regulations of the Act on Investment Companies (KAGG) and the Foreign Investment Act have been summarized and fundamentally revised. The main idea behind investment taxation is the principle of transparency , i.e. the fundamental equal treatment of the investor in investment units with the direct investor . Unless transparency is expressly stipulated, results are allocated for tax purposes, similar to that of a corporation, only when the shares are distributed or sold.

The aim is to ensure the taxation of investment gains § 1 InvstG.

The Investment Tax Act applies to the taxation of German investors in investment funds , i. H. Undertakings for Collective Investment in Transferable Securities ( UCITS ) and Alternative Investment Funds ( AIF ), applicable. It differentiates between investment funds , partnership investment companies and capital investment companies.

A mutual fund in this sense is

• if a fund is set up or launched before December 24, 2013, a domestic investment fund ( UCITS or AIF ) in the form of a special fund or an investment stock corporation or a foreign investment fund that is mixed with risks (at least four different assets) in certain assets (in particular securities , money market instruments , derivatives , Real estate) and is either subject to qualified investment supervision or regularly redeems fund units for payment

and

• If a fund is set up or a fund is launched from December 24, 2013, a domestic or foreign investment fund (UCITS or AIF) that may invest in certain assets with a mixed risk, may not take on an excessive degree of debt capital (so-called leverage) and is subject to qualified investment supervision as well Regularly redeems fund units against payment.

Investment funds that do not meet these mutual fund requirements qualify either

• (eg. as a person Investment Companies private equity funds , closed-end funds , ship funds in the legal form of partnerships ) where taxation of investors by way of uniform separate determination pursuant to § 180 AO is done, or
• as capital investment companies (e.g. newly launched hedge funds in the legal form of a capital company ), for which the additional taxation of the External Tax Act may apply .

The Investment Tax Act allocates certain income from the investment fund to German investors (in particular interest , dividends , capital gains from so-called AGE papers, rental income, real estate capital gains within 10 years of acquisition, certain other income) annually, even if the investment fund does not receive this income distributes them, i.e. they reinvested (so-called distribution-equivalent income). The fund's income and profits that are not included in the distribution-equivalent income are only realized at investor level when the investment fund distributes them or when the investor sells or redeems the fund units.

For private investors , distribution-equivalent income and distributed income are taxable with 25% withholding tax plus solidarity surcharge and, if applicable, plus church tax. Profits from the sale of fund units - after deduction of the distribution-equivalent income already taxed during the holding period - are also taxed with flat rate tax, provided that the private investor has acquired the fund units from January 1, 2009. The profit from fund units acquired before January 1, 2009 is generally tax-free for private investors if they have held the fund units for more than a year (so-called speculation period ).

In the case of business investors, income equivalent to distribution and distributed income, if it is a natural person, must be taxed with income tax (plus solidarity surcharge) and trade tax , if it is a corporation or corporation, with corporation tax (plus solidarity surcharge) and trade tax. Profits from the sale of fund units are also taxable after deducting the distribution-equivalent income that was already taxed during the holding period. The so-called partial income procedure (40 percent tax exemption) or the participation privilege (de facto 95 percent tax exemption) for income (so-called dividends) and capital gains from shares comes in accordance with the transparency principle for this part of the income equivalent or distributed and the capital gains with fund shares to use.

In accordance with the principle of transparency, certain tax exemption and credit provisions of the double taxation agreements apply to both private and corporate investors , provided that income equivalent to distribution or distributed income or the capital gain with the fund units contains corresponding income components. For example, investors benefit from the tax exemption of income and profits from foreign real estate provided for in the double taxation agreement and can offset foreign withholding tax in accordance with the double taxation agreement as if they had invested directly in the investment fund's assets.

The dividend-equivalent and distributed income attributable to the investor must be determined by the investment fund within four months of the end of the financial year (accumulating funds) or from the date of the distribution resolution (distributing funds) and published in the electronic Federal Gazette together with a professional certificate . If this does not happen, a generally disadvantageous flat-rate taxation applies to the investor .

Investment Tax Act from January 1, 2018 (Art. 1 G. of July 19, 2016)

Key points and motives of the Investment Tax Reform Act

Central elements of the new regulation represent the abolition of the "transparent" taxation system for (public) investment funds through separate taxation of investment funds and investors combined with a flat taxation (advance flat rate) at investor level. It remains only for so-called special investment funds - with various modifications - with the previous (semi-) transparent taxation of the system until 2017. In order to avoid transition difficulties, the law as of December 31, 2017, faked German investors to sell all their fund units coupled with a fictitious repurchase. This leads to a loss of the tax exemption for fund units acquired before January 1, 2009 for value increases occurring from 2018 (no grandfathering ). The motives for reform on the part of the German tax authorities were, in addition to the endeavor to simplify fund taxation and avoid tax arrangements, above all EU legal risks of the previously applicable law. In the specialist literature, the achievement of these goals is viewed critically, in particular the partial exemption of German investors in investment funds with simultaneous burdening of domestic and foreign investment funds presents itself as problematic under EU law as the currently discussed German car toll . According to the new law, all funds are taxed equally. There is no difference between domestic and foreign funds or between distributing and accumulating ( reinvesting ) funds.

Different tax systems depending on the type of tax fund

The Investment Tax Act since from 1 January 2018 distinguishes between four independent taxation systems:

• Investment funds for which a completely new taxation regime will apply from January 1, 2018, with taxation at fund level coupled with flat-rate taxation at the level of German investors (so-called advance flat-rate): According to § 1 InvStG, all UCITS (organizations for joint Investment in securities that meet the requirements of UCITS Directive 2009/65 / EC), all AIFs (undertakings for collective investment that invest the capital collected from investors in accordance with a defined investment strategy for their benefit, no operating company outside of the Financial sector ( Section 1 (1) KAGB ) and do not meet the requirements of the UCITS Directive 2009/65 / EC), all single-investor funds and all tax-exempt, non-operational corporations.
• Special investment funds for which, with certain modifications, the semi-transparent taxation procedure in force until 2017 in the old Investment Tax Act is retained: According to §§ 26 ff. InvStG, all UCITS , AIF , one-investor funds and tax-exempt, non-operational corporations are considered Special investment fund, if the fund is limited to the investment and management of its funds for the joint account of the investors, does not manage its assets to a significant extent and complies with certain investment regulations set out in § 26 InvStG, generally has no natural persons as investors and to a maximum 100 investors is limited.
• Funds in the legal form of a partnership , which are neither UCITS nor pension fund funds , are subject to the general German taxation rules for partnerships, which provide for transparent taxation at investor level.
• Funds that are subject to special laws , for example corporate investment companies, capital investment companies, REIT stock corporations and REIT corporations within the meaning of the REIT Act.

Since hedge fund certificates are not investment certificates under securities law , but rather bearer bonds , they are not subject to the provisions of the InvStG.

Tax treatment of investment funds and their German investors

Corporate income tax burden on the mutual fund

When taxing investment funds, a distinction must be made between the taxation of the domestic or foreign investment fund itself and the taxation of German investors in these investment funds:

• From January 1, 2018, both domestic and foreign funds are subject to corporation tax with certain German income in accordance with Section 6 InvStG, namely with
  • Dividends from German corporations and certain dividend replacement payments: The corporation tax is settled with the withholding of the capital gains tax and amounts to exactly 15% including the solidarity surcharge of 5.5% of the corporation tax (14.218% corporation tax plus 0.782% solidarity surcharge).
  • Income from renting and leasing German real estate (land, buildings, residential property and rights equivalent to real property), profits from the sale of German real estate and certain other income from German sources: the domestic or foreign investment fund is subject to corporate income tax assessment , so that, for example costs associated with the property can be deducted. The corporate tax rate is 15% plus 5.5% solidarity surcharge, for a total of 15.825%.

Taxation of German investors in investment funds with (partial) compensation of the tax burden

• As of January 1, 2018, German investors will have to pay tax on the following income from (retail) investment funds in accordance with Section 16 of the Investment Tax Act and may use the following partial exemption:
  • Distributions by the investment fund in accordance with Section 2 (11) of the Investment Tax Act: the amount of the disbursement that an investment fund distributes to the investor, the investor has taxable income in the assessment period (year) in which the distribution accrues to the investor or is to be booked with him.
  • So-called advance lump sums according to § 18 InvStG: In the case of investment funds that reinvest (not distribute) or that distribute less than a so-called basic income for the investor that is at least taxable annually, the investor should pay tax at least the so-called advance lump sum. The advance lump sum is the amount by which the distributions of an investment fund within a calendar year fall short of the base income for that calendar year. The base return is determined by multiplying the redemption price of the investment unit at the beginning of the calendar year by 70% of the base rate in accordance with Section 18 (4) of the Investment Tax Act. The base yield is limited to the additional amount that arises between the first and last redemption price set in the calendar year plus the distributions within the calendar year. In the year in which the investment units were acquired, the advance flat-rate fee is reduced by one twelfth for each full month preceding the month of acquisition. The advance lump sum is deemed to have been paid on the first working day of the following calendar year.
  • Profits from the sale of (public) investment fund units according to § 19 InvStG: The profit from the sale is the difference between the sale proceeds minus the acquisition costs, reduced by the advance lump sums applied during the period of ownership (since this is already taxed, but still included in the sale proceeds / redemption price upon sale are included).
  • So-called partial exemption: The distributions, the advance lump sums and the capital gains with fund units are tax-exempt to a certain extent for certain fund categories, depending on the type of investor , in accordance with Section 20 of the Investment Tax Act. For private investors invested in equity funds , life and health insurance companies and for banks holding fund units in the trading book, 30% of the income is tax-free (partial exemption). In the case of natural persons who hold their investment units as business assets, the share exemption is 60%. For investors who are subject to the corporate income tax law, the partial share exemption is 80%. In the case of mixed funds , half of the partial exemption for equity funds applies (mixed fund exemption). For real estate funds, 60% of the income is tax-free if at least 51% of the value of the investment fund is continuously invested in real estate and real estate companies in accordance with the investment conditions, or 80% of the income if, according to the investment conditions, at least 51% of the value of the investment fund is continuously invested in foreign real estate and Foreign real estate companies are created. Foreign real estate companies are real estate companies that invest exclusively in foreign real estate (so-called partial real estate exemption).

example

A mutual fund qualifies as a pension fund. The redemption price as of January 1, 2018 is EUR 1,000 per unit and the interest rate according to Section 18 (4) InvStG is always 14.2857%, so that the base return is 10%. On October 1, 2018, a German investor acquired a share in the investment fund for EUR 1,100. On December 31, 2018 and January 1, 2019, the redemption price per unit would be EUR 1,200. The fund did not make any distributions during 2018. On March 31, 2019, the fund will distribute EUR 50 per unit. The German investor is selling his stake on January 2, 2020 for EUR 1,300.

• 1.1.2019: Taxable advance flat rate: 3/12 × 10% × 1,000 = 25 EUR
• March 31, 2019: Taxable distribution: EUR 50
• 1.1.2020: Taxable advance flat rate: 10% × 1,200 - 50 = EUR 70
• 2.1.2020: Taxable capital gain: 1,300 - 1,100 - 25 - 70 = 105 EUR

Variation: It is an equity investment fund (at least 51% shares): If the investment fund now generates dividend income from German shares, the investment fund must pay 15% corporation tax (including solidarity surcharge), which is settled with the capital gains tax on dividends. For this, German investors can claim the so-called partial exemption of their tax income from the investment fund, which results in the following reduced tax assessment bases for private investors, life or health insurance, credit institutions with fund shares in the trading book portfolio:

• 1.1.2019: Taxable advance flat rate: 3/12 × 10% × 1,000 × 70% = EUR 17.50
• March 31, 2019: Taxable distribution: EUR 50 × 70% = EUR 35.00
• 1.1.2020: Taxable advance flat rate: (10% × 1,200 - 50) × 70% = 49.00 EUR
• January 2, 2020: Taxable capital gain: (1,300 - 1,100 - 25 - 70) × 70% = EUR 73.50

Base rate and base return from 2018

published information from the Bundesbank and the Federal Ministry of Finance

date	Base rate	Base return (70% of base rate)
2018-01-02 / 04	0.87%	0.609%
2019-01-02 / 09	0.52%	0.364%
2020-01-02 / 29	0.07%	0.049%

Discussion and criticism

The specialist literature discusses whether the Investment Tax Reform Act violates European law. The uniform taxation introduced for domestic and foreign investment funds goes hand in hand with a partial exemption for German fund investors that has been introduced at the same time for investment funds with a corresponding pre-tax burden. In the similar constellation of the car toll planned in Germany for all users of German motorways in a temporal context with a relief for German drivers by reducing the German vehicle tax , there have been controversies for years about compatibility with European law. It is also criticized that the investment tax reform is a burden on small savers, pensioners and private retirement provision , since the partial exemption system does not apply to low capital income.

Web links

• Text of the Investment Tax Act (version applicable before 2018)
• Text of the Investment Tax Act (version applicable from 2018)

See also

• Taxe d'abonnement

Individual evidence

1. ↑ BT printed matter 15/1553, S. 120th
2. ↑ Patzner / Döser / Kempf: Commentary on the Investment Act (InvG), Das Deutsche Bundesrecht III H 27 , Nomos Verlagsgesellschaft, ISBN 3-7890-0191-0 .
3. ^ Patzner / Kempf: hand commentary investment law . 3. Edition. Nomos, Baden-Baden 2017, ISBN 978-3-8487-2624-0 , p. 770 ff .
4. ^ Patzner / Kempf: hand commentary investment law . 3. Edition. Nomos, Baden-Baden 2017, ISBN 978-3-8487-2624-0 , p. 798 f .
5. ↑ Patzner / Döser / Kempf: Comment on Investment Tax Act (InvStG), Das Deutsche Bundesrecht VII B 27 , Nomos Verlagsgesellschaft, ISBN 3-7890-0191-0 .
6. ↑ Patzner / Döser / Kempf: Comment on Investment Tax Act (InvStG), Das Deutsche Bundesrecht VII B 27 , Nomos Verlagsgesellschaft, ISBN 3-7890-0191-0 .
7. ↑ ^{a b} Rehm / Nagler: The most recent discussion draft of an investment tax reform law in the focus of Union law . In: Betriebsberater . tape 34 . dfv media group, 2015, p. 2006 ff .
8. ^ Patzner / Nagler: hand commentary investment law . 3. Edition. Nomos, Baden-Baden 2017, ISBN 978-3-8487-2624-0 , p. 1032 .
9. ↑ Text of the UCITS Directive 2009/65 / EC
10. ↑ Hans Stamm / Hilger von Livonius, Hedge Funds for Private Investors in Germany , in: Absolut-Report 13, 2003, p. 49
11. ^ Patzner / Nagler: hand commentary investment law . 3. Edition. Nomos, Baden-Baden 2017, ISBN 978-3-8487-2624-0 , p. 1051 .
12. ^ Patzner / Nagler: hand commentary investment law . 3. Edition. Nomos, Baden-Baden 2017, ISBN 978-3-8487-2624-0 , p. 1085, 1109 .
13. ↑ BMF letter "Base interest rate for calculating the advance flat rate in accordance with Section 18 (4) InvStG 2018"
14. ↑ BMF letter "Base interest rate as of January 2, 2019 for calculating the advance flat rate according to Section 18 Paragraph 4 InvStG"
15. ↑ BMF letter "Base interest rate as of January 2, 2020 for the calculation of the advance flat rate according to Section 18 (4) Investment Tax Act (InvStG)"
16. ↑ Investment tax reform 2018: How funds with foreign investors defend themselves against tax disadvantages | dasinvestment.com . In: dasinvestment.com . ( dasinvestment.com [accessed January 18, 2017]).
17. ^ Patzner / Kempf / Nagler: hand commentary investment law . 3. Edition. Nomos, Baden-Baden 2017, ISBN 978-3-8487-2624-0 , p. 1028 f .
18. ↑ BVI: Planned investment tax reform burdens small savers and old-age provision . In: www.fondsprofessionell.de . ( fondsprofessionell.de [accessed January 2, 2017]).

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