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Operational tax news - Germany update - 15 July 2011


Current-value depreciation of parts in foreign or domestic equity funds

In its decision dated 26 September 2007, the German Federal Finance Court allowed the current-value depreciation due to permanent decline in value of listed parts of a joint stock companies that are part of the business assets. The term “probably permanent impairment” (voraussichtlich dauerhaften Wertminderung) is applicable if the market value per closing date of the balance sheet is lower than the acquisition cost, and it is not expected that it will recover before the preparation of the balance sheet.

The German Ministry of Finance has declared in its circular published on 5 July 2011 that the same provisions are applicable to indirect investments in equity through holdings in foreign or domestic equity funds. Those provisions are applicable for business investors located in Germany that hold parts in investment funds as part of their current assets.
It has to be stated that in this context a fund is treated as equity fund if at least 51% of its assets are composed of listed stocks.

A “permanent impairment” in the sense of the German Tax Regime will be considered if the following provisions are met:

  • The redemption price of the share per closing date is 40% less than the acquisition cost.


  • The redemption price of the share per current and previous closing date is 25% less than the acquisition cost.

The provisions of the above mentioned decision of the German Federal Finance Court and the German Ministry of Finance are applicable for balance sheets prepared after 26 March 2009.

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



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