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German Annual Tax Act 2013: Investment funds - 08/11/2012


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On 25 October the German Bundestag (lower house of the German Parliament) approved the draft of the Annual Tax Act 2013. The Bundesrat (upper house of the German Parliament) is expected to vote on this bill on 23 November.

The Annual Tax Act 2013 is scheduled to come into effect on 1 January 2013. However, as the bill in its current form ignores several legislative proposals made by the Bundesrat concerning, amongst others, the German Investment Fund Tax Regime, it may be subject to further changes.

In particular, most relevant proposals of the Bundesrat, which were not included in the draft at present:

  • Modification of the rules for the allocation of income linked expenses to income generated by an investment fund
  • Introduction of binding rules on the order in which the different types of liquidity of a fund might be used for distribution purposes
  • Implementation of anti-abuse provisions to avoid the abusive use of bond stripping strategies
  • Potential implementation of a new daily tax figure called “Dividend-Profit”

Should the Annual Tax Act 2013 be rejected by the Upper house at the end of this month, a mediation committee, comprising members of both houses, will take place. In that case, some of the Bundesrat`s proposals could still be integrated into the draft.

At present it is unclear if, and to what extent, there might be changes in the law regarding investment funds, as the draft has still to be approved by the Bundesrat to come into effect.

In addition there also might be modifications due to possible agreements negotiated in the mediation committee.

We will follow up on the legislative process and continue to keep you updated in case of any new development.

If you have any queries regarding the above, please do not hesitate to contact us.

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