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Fund Taxation Alert 2017-16

Fund Taxation Alert 2017-16



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German Investment Tax Act 2018: German Ministry of Finance allows a simplified procedure for computing the tax figures for the fictitious financial year end.

In light of the German Investment Tax Act Reform, investment funds with a financial year end other than 31 December 2017 have the possibility to apply a so-called simplified procedure, pursuant to Section 5 (1) InvStG 2004:

  • The ‘estimate value’ is based on the average amounts published over the last two years. In addition, the average of the previous financial years must be stated pro rata temporis (e.g. 25% for fictitious financial years from 1 October 2017 to 31 December 2017).
  • This applies to the deemed distributing income, including ordinary income in accordance with Section 56 (7) sentence 1 & 5 InvStG 2018, less interim distributions, for accumulating as well as distributing share-classes.
  • The publication of the estimated values must be processed by 30 April 2018 at the latest.
  • The simplified procedure is only eligible when applied to all investment funds of a ManCo.

The German tax authorities will accept that no correction procedure is necessary when the below listed actual taxable bases do not deviate by more than 30% from the values determined in the simplified procedure:

  • The actual DDI income in accordance with Section 5 (1) sentence 1 no. 2 InvStG 2004.
  • The dividend part in accordance with Section 5 (1) sentence 1 number 1 letter c double letter aa InvStG 2004.
  • The tax-exempt income from double taxation agreements as per Section 4 paragraph 1 InvStG § 5 paragraph 1 sentence 1 number 1 letter c double letter gg InvStG 2004.
  • Eligible creditable foreign (withholding) taxes section § 5 (1) sentence 1 no. 1 letter f InvStG 2004.

In the event of redemption of shares prior to 31 December 2017, the German withholding tax is then deducted on the basis of estimates in accordance with 139 of the BMF-Circular of 18 August 2009 (BStBl I S. 931).

Should only one of the aforementioned taxable bases exceed the allowed 30% threshold, the difference between the estimated and actual values must be computed and the correction amount published by 31 December 2018 at the latest. In this case, overpaid withholding tax should be reimbursed or, if too little withholding tax is deducted, a supplement payment is due.

Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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