On 15 May 2018, the Federal Ministry of Finance published a further BMF circular on selected application issues (IV C 1 - S 1980-1/16/10010:013) in anticipation of the still pending comprehensive investment tax decree. Some important statements on the taxation of (public) investment funds (Chapter 2 InvStG 2018) can be summarised as follows:

  • Domestic investment income taxable at the level of an investment fund (fund input side) also includes certain fees within the scope of Securities lending and repurchase transactionsThe company is not obliged to pay dividends, e.g. compensation payments (so-called manufactured dividends), which take the place of dividend income from lent domestic shares.
  • This is intended to avoid tax avoidance with regard to domestic dividend income (which is to be subject to a definitive corporation tax of 15% at fund level), which could be achieved, for example, by the investment fund lending domestic shares shortly before the dividend record date to a taxable resident who can offset the capital gains tax incurred.
  • Therefore, such remuneration is not subject to taxation if no claims to domestic investment income arise during the period of the transfer, i.e. no profits are distributed. In addition, the amount of taxable remuneration is limited to the gross dividend lost by the investment fund.

Expendituree.g. financing expenses for the acquisition of fund units that are linked to income from partially exempt investment funds "in an economic context" are not deductible to the extent that they are attributable to income from a partial exemption (Section 21 InvStG). In contrast to the last draft version of the large InvSt decree, the tax authorities are now of the opinion that, in the case of credit institutions, an economic connection between investment income with partial exemption privileges and interest expenses for customer deposits, interbank deposits, bonds and comparable general interest expenses (so-called pool refinancing costs) must be assumed.

Our Real Estate Day 2018 will take place on 5 July 2018. On this day, we will provide you with information on current topics relating to the property market in the Stuttgart metropolitan region, including an update on property tax law. You will receive further information here.

Yours TAXGATE team will be happy to answer your questions at any time.