Germany

Under the Germain Investment Tax Act (GITA), two regimes are possible for AIFs qualifying as a fund: the "Mutual Fund" regime or "Special Fund" regime.

• Mutual fund regime (GITA)
• Special Fund regime (GITA)

Up-front registration

Taxation mechanism

Annual reporting

Periodic reporting (daily)

*Under the GITA 2018, there is no tax filing to tax authorities. The tax prelevement is applied by German banks to German investors accounts by the end of January based on information available on WM Datenservices, financial data platform in Germany. It is necessary to verify the correctness of the information available to German banks and to provide a calculation of the annual lump sum together with the partial exemption status applicable to investors so as to ensure the correct application of the preliminary taxation.

German investors in foreign and domestic investments funds, are taxed :

• on dividend distributions made by the investment fund;
• on an annual upfront prepayment charge (“annual lump sum taxation”); and
• on capital gains upon disposal of the shares of the investments.

The annual lump sum taxation is calculated on the basis of, among other components, the initial net asset value and the German reference interest rate. The taxable basis is capped at the performance of the share which may lead to a nil taxation in case of negative performance.

The payment of tax is due by German investors within 30 days after the calendar year-end and German paying agents are expected to withhold the tax. They are relying on information provided by WM Datenservice, a financial service firm in Germany. The correctness of the annual lump sum taxation will be very much dependent on the completeness and accuracy of the information available on the WM Datenservice database.

The possibility to benefit from exemption depends on the investment policy (= “partial tax exemption status for Mutual Fund”). The partial tax exemption applies to the dividend distribution, the annual lump sum, and the capital gains.

• There are three principal categories: Equity Fund / Mixed Fund / Other Fund
• The partial exemption status or the reference to the minimum investment in equity (“Equity” in the meaning of Germany tax definition) has to be defined in the contractual documents of the AIF (prospectus).
• Any breach to the ratio may trigger a fictitious sale with the taxation of the fictitious capital gain. The equity ratio of each sub-fund has to be monitored on a daily basis.
• For funds of funds, a daily equity ratio from the target funds is required to apply a look -through approach on the daily equity ratio computation.Publishing the daily equity ratio for “Equity” and “Mixed” funds has become a market practice but it can also apply to “Other” funds.
• AIF not registered but meeting the conditions of an “Equity” or “Mixed” fund have the possibility to apply for a retroactive qualification according to the Art.20.4 of the Law.

Operationally, to benefit from the access to the regime, AIFs must register their share classes to WM DatenServices under the retail fund regime with the identification of the applicable partial exemption status. In addition, the AIF manager has to request A WKN number (WM Daten single identifier).

Main partial exemption categories: