The Investment Tax Reform Act (InvStRefG) also resulted in an amendment to Section 4 no. 8 letter h UStG as of 1 January 2018. This tax exemption for the management of investment funds serves to treat private investors who invest directly in securities or property equally with those who invest via an investment vehicle. With the amendment, the exemption standard no longer refers in general terms to the "management of investment funds within the meaning of the Investment Tax Act", but now specifically names certain regulated investment funds whose management is exempt from VAT.

The new regulation also implements the case law of the European Court of Justice (ECJ), according to which the tax exemption extends selectively to certain investment funds regulated under the German Investment Code (KAGB).

The Federal Ministry of Finance (BMF) has now specified the new regulation in more detail in an administrative letter. The letter also amends the Value Added Tax Application Decree (UStAE).

According to the new regulation and the supplementary letter, investment funds whose management can be carried out tax-free are included:

  • Undertakings for collective investment in transferable securities (UCITS) within the meaning of section 1 (2) KAGB,
  • alternative investment funds (AIF) comparable to these within the meaning of Section 1 (3) KAGB,
  • Pension schemes within the meaning of the Insurance Supervision Act

The decisive factor is that the investment fund is subject to state supervision. This criterion also applies to the comparability of AIFs. The following criteria also apply:

  1. AIFs must address the same group of investors as UCITS,
  2. AIFs must be subject to the same competitive conditions as UCITS,
  3. AIF unit rights must be issued to several investors,
  4. the return on the investment must depend on the results of the investment during the investment period,
  5. the unitholders must be entitled to the profits realised by the AIF and must also bear the risk,
  6. the assets collected must be invested in accordance with the principle of risk diversification for the purpose of risk spreading.

The term "management" is explained further. The services must be specific and essential for the management of investment assets. This does not include the actual management of properties.