With Letter dated 18 January 2019 the Federal Ministry of Finance (BMF) has issued a statement on the treatment of "special fees and benefits" in connection with capital investments by private investors. These fees/benefits, which are granted in addition to interest, dividends etc., are part of the taxable income from capital assets (Section 20 (3) EStG). This applies, for example, to compensation for damages (e.g. from advisory errors) and goodwill refunds in connection with securities and fund units.
Under the new InvStG, investors can benefit from so-called "tax relief" on distributions from equity, mixed or property funds under certain conditions. Partial exemptions (e.g. 30% for distributions from equity funds to private investors). It is to be welcomed that the tax authorities also apply the partial investment tax exemptions to compensation and goodwill payments in connection with corresponding fund units.
Furthermore, partial exemptions are also granted on taxable refunds of trailer fees (remuneration from retrocessions or "kick-backs"), provided the payments are in connection with fund units with partial exemption privileges.
If the fund qualification changes (e.g. conversion of a mixed fund into an equity fund by increasing the equity ratio to at least 50%), the partial exemption rate also changes (from 15% to 30% for private investors). For the above payments, the partial exemption rate applicable at the time of payment or reimbursement is applied.
The BMF circular also contains important explanations, e.g. on forward exchange transactions, subscription rights and loss offsetting. When preparing income tax returns, existing income statements should be reviewed with regard to these points.
Yours TAXGATE Team is available to answer your questions at any time.
