Investment Fund Managers Prepare For German Tax Reform

German investment fund taxation is poised to have a significant impact on Luxembourg's fund world in 2018. As Luxemburg is a hub for asset servicing and asset managers in Europe, the upcoming reform in German investment tax will necessitate a fundamentally new set up here in the Grand Duchy, if the country is to remain the ideal spot to administrate, sell and manage UCITS and AIFs for German investors

It's key to remember that the effective tax rate paid by investors for their investments is becoming increasingly important. Demand for your product, whatever it is, will increase as the investor tax rate lowers. However, interestingly, the German tax reform will bring into existence significant partial tax exemptions on an investor level for equity, mixed and real estate funds. Despite their profitability being less than other products, e.g. bond funds, these tax-exempt funds will be especially prized by investors.

It is therefore crucial for fund managers to analyse their current product portfolio from a German tax point of view, and to start penning in eventual amendments for products in demand.

The factsheet The main facts and impacts of the reform may be summarised as follows:

Fund managers must ensure that their legal and reporting departments are in line with the new law (e.g. in terms of equity quote and treatment of tax exempt investors). A status certification will need to be applied in...

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