Accumulation

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The concept of reinvestment (v. Gr. Thesauros "treasure house") refers to processes in which the profits generated by an organization gains not issued or distributed (be retained) are but remain even in the organization.

Reinvestment is of particular importance for fund companies . If it is retained , the income generated by a fund in the assessment period (AP) is not distributed to the shareholders of the fund, but used to increase the fund's assets (retained). The individual parts thus have a higher intrinsic value.

Accumulation benefit

To favor the profits not withdrawn i. S. d. Section 34a of the Income Tax Act see retention benefits .

Comparison with cash distribution

Compared to the cash distribution of the income, the accumulation has the “advantage” for the shareholders of the generally lower tax burden. The capital growth associated with a retention is all the higher in relation to the sale due to the corresponding increase in fund assets. If a corporation does not distribute the profit it has made to the shareholders, but instead retains it, for example in order to put it in reserves , in certain corporate tax systems the undistributed (retained) profits may be taxed at a different tax rate than that for Distributed Profits.

In addition, the accumulation often ensures a disproportionate increase in the fund unit value compared to the distribution , comparable to the compound interest effect with financial investments.

Comparison with reinvestment

The retention is to be separated from the reinvestment . In this case, the income is initially distributed, but then (possibly in an automated process) reinvested in other papers of the same security . The fund management thus passes on the growth in assets to the shareholders through the allocation of additional fund shares.

Aside from tax issues to retain and reinvest differ in yield performance not: in economic theory of the individual fund unit increases through the accumulation or through the reinvestment of value by exactly the amount retained.

literature

  • Special tariffs according to Sections 34 and 34a EStG. In: Christiana Djanani, Gernot Brähler, Christian Lösel: Income taxes. 4th revised and updated edition. Lucius & Lucius Verlagsgesellschaft, Stuttgart 2010, ISBN 978-3-8252-2549-0 , pp. 192–206, here: Benefit for retention according to § 34a EStG (pp. 196–206)
  • Accumulation benefit. In: Cord Grefe: Corporate Taxes . 14th, updated and supplemented edition. NWB Verlag, Herne 2011, ISBN 978-3-470-58544-4 , pp. 240-250.