On 8 November 2017, the Federal Ministry of Finance published a third BMF circular on application issues relating to the InvStG 2018 (IV C 1 - S 1980-1/16/10010 :010). The most important statements can be summarised as follows:

  • The banks obliged to deduct capital gains tax may not access the data of financial service providers (e.g. WM Data). If a bank uses such service providers, it may be liable for failing to deduct capital gains tax.
  • The BMF letter dated 14 June 2017 contains Easier calculation of the equity participation ratio for funds of investment funds. The tax authorities will not object if an umbrella investment fund relies on a declaration by a target investment fund to determine its equity participation ratio by (and including) 30 June 2018 at the latest that the target investment fund will comply with a specifically named minimum equity participation ratio higher than 51% or 25% on an ongoing basis during the 2018 calendar year and this higher minimum equity participation ratio is specified in the investment conditions of the target investment fund by (and including) 30 June 2018 at the latest.
  • Depository receipts (so-called depositary receipts, e.g. American Depositary Receipt (ADR), Global Depositary Receipts (GDR), European Depositary Receipts (EDR)) on shares do not constitute equity investments within the meaning of Section 2 (8) InvStG 2018, as they are not shares in a corporation themselves. At the same time, according to the tax authorities, income from such depositary receipts on domestic shares constitutes taxable domestic investment income (section 6 (3) sentence 1 no. 1 InvStG 2018).
  • Tax-free share classes and so-called cum/cum transactionsAccording to section 10 (1) sentence 2 InvStG 2018, domestic investment income is only tax-exempt if the investment fund fulfils the requirements for the creditability of capital gains tax in accordance with section 36a EStG. § Section 36a EStG contains restrictions on the refund/credit of capital gains tax for certain share purchases around the dividend record date. When refraining from deducting capital gains tax, the taxpayer may generally rely on the investment fund reaching the minimum holding period pursuant to Section 36a (2) EStG. The taxpayer may also generally trust that the investment fund will bear the minimum risk of changes in value pursuant to Section 36a (3) EStG. If it is later determined that the investment fund has sold the shares before reaching the minimum holding period pursuant to Section 36a (2) EStG, the person liable to pay capital gains tax must subsequently levy capital gains tax. If the investment fund realises that it was not the beneficial owner of the shares or that the person liable to pay tax wrongly assumes that the minimum holding period pursuant to section 36a(2) EStG has been reached or that it did not bear the minimum risk of a change in value pursuant to section 36a(3) EStG, it must notify the competent tax authority pursuant to section 4 InvStG 2018 and make a payment pursuant to section 36a(4) EStG.
  • Change in fund qualificationAccording to section 22(1) sentence 1 InvStG 2018, an investment unit is deemed to have been sold on the day on which the applicable partial exemption rate changes (e.g. due to a categorisation as a mixed fund instead of a categorisation as an equity fund as a result of a change in the investment conditions). The date on which the amendment to the terms and conditions of investment takes effect is decisive for the fiction of realisation. If the amendment to the Terms and Conditions of Investment is subject to approval by a supervisory authority, the earliest date on which an amendment can be assumed to be effective is the date of approval. The above-mentioned date on which the fictitious realisation occurs must also be taken into account by the person liable for payment. If the deemed sale subsequently becomes known, the taxpayer must make any necessary corrections to the tax deduction.
  • Specialised investment funds without transparency optionIf the transparency option is not exercised, the full domestic investment income including the tax deductions levied on the special investment fund must first be taken into account when determining income at investor level (gross amount). The tax exemption pursuant to section 42(4) InvStG 2018 must then be applied to this gross amount. ExampleSpecial Investment Fund S earns €100 per unit in domestic dividends and does not opt for the transparency option. After deduction of capital gains tax, € 85 per unit remains, which is distributed to the investors.
  • The tax exemption pursuant to section 42(5) InvStG 2018 reduces the trade tax assessment basis in accordance with the current wording of the law. Section 45 InvStG 2018 is therefore not applicable.

Further information can be found in our TAXGATE Blog or within the framework of our events.