On 9 June, the Bundestag passed a draft law on the reform of investment taxation. The draft law provides for a complete change in the taxation system for mutual funds, with taxation of domestic income at the level of the investment fund. In addition, distributions, gains on the sale of fund units and an annual advance lump sum will be taxed at investor level using typifying partial exemptions (e.g. equity funds 30%, mixed funds 15% for private investors) (cf. on the Draft bill Elser/Thiede, NWB E+V 2016, 51). The new regulations will apply from 2018 and will lead to casuistic tax results in future compared to direct investments, depending on the fund composition and tax status of the investor.

The draft bill also contains the unchanged abolition of the withholding tax protection for old fund units acquired before 1 January 2009. Although the increases in value accrued to date remain tax-free, increases in value from 2018 onwards are taxable (after deduction of an allowance of EUR 100 thousand).

The draft bill contains only a few additions compared to the previous drafts, of which the following points in particular should be emphasised:

  • Property disposal gains: The tax exemption for property disposal gains at fund level after a 10-year holding period will be abolished. Gains in value that occurred before 1 January 2018 will remain tax-free, provided that the period between acquisition and sale by the investment fund is more than ten years.
  • Bondstripping in private assets: The aim is to prevent arrangements aimed at generating losses from capital assets that are subject to the personal tax rate in accordance with Section 32d (2) EStG and can therefore be fully offset against other income, while the gains are subject to flat-rate withholding tax at a rate of 25%.
  • Prevention of cum/cum transactions: With effect from 1 January 2016, a 45-day minimum holding period within a corridor of 91 days before and after the dividend record date is a prerequisite for the full crediting of capital gains tax at the level of the dividend recipient. The dividend recipient must bear at least 70% of the risk of changes in value within the minimum holding period, whereby hedging transactions by related parties are also taken into account.

The law now still requires the approval of the Bundesrat, which is expected to deal with the bill in its last meeting before the summer break on 8 July 2016. It is unlikely that the Bundesrat will not approve the law and call upon the Mediation Committee.

StB Dr Thomas Elser, TAXGATE, Stuttgart.