German Investment Tax Act: tax treatment of securities-lending
In our last newsletter we mentioned that securities-lending should not be taken into account when calculating the equity ratio of the respective investment fund that acts as the lender of the securities.
The German Ministry of Finance has now circulated a draft circular regarding the treatment of income from securities-lending at the investment fund level.
The most important clarification relates to the fact that investment funds (including Luxembourg funds) have to file a tax declaration in Germany in order to disclose taxable income, especially when the fund receives, under a securities lending agreement, a substitute payment from a foreign borrower
We have summarised the essential parts of this draft letter:
We are currently analysing the impact of this draft circular on Luxemburgish funds in cases of corporate tax return filing. On one hand, we see an advantage as the tax basis will be reduced by costs and loss carry forwards. On the other, the effective tax rate will potentially increase to 15.825% instead of 15% as the solidary tax of 5.5% on the corporate tax (15%) is applicable in corporate tax returns. This is not the case when the tax is levied directly at source as the tax rate is than capped at 15%.
KPMG is able to help you fulfil the tax declaration obligations in Germany for your investment funds.
Please contact us if you have questions.
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.
© 2021 KPMG Luxembourg, Société coopérative, a Luxembourg entity and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.