On 30 January 2013, the German federal government introduced the draft Act Amending the German Investment Tax Act and Other Acts (AIFM Tax Amendment Act, or GITA-AIFM) in order to adapt the German tax laws to the new regulatory regimes which implement the AIFMD into German law, thereby commencing the legislative enactment process, which requires the approval of the upper house of the German parliament.

In our Client Newsletter, we will focus on outlining the scope and timing of the application of the GITA-AIFM and the consequences thereof for different asset and fund types.

The draft of the future German Investment Tax Act, which should enter into effect simultaneously with the new German Investment Code on July 22, 2012, was published today. In our Newsletter we outline the new scope of application in particular. In the future, the legislator must decide where to draw the dividing line between alternative investment funds under the German Investment Tax Act and alternative investment funds under the general tax rules.

On November 22, 2012, the ECJ (C-600/10) held that the European Commission had not substantiated that Germany taxes dividends and interests of foreign pension funds in a discriminatory way compared to German pension funds. The judgement was surprising: Whereas in the infringement procedure against Finland the ECJ recently held (8 November 2012, C-342/10) that Finnish pension funds are preferentially taxed compared to foreign funds, the European Commission failed to demonstrate the same in the infringement procedure against Germany. The answer to this result: In the case against Germany, the Commission tried to argue that specific deductions are allowed for German pension funds only. The Commision then failed to prove this. The argument against Finland was rather simple in that the Commission argued in this case that Finnish pension funds paid no tax compared to foreign pension funds which paid taxes on Finnish interest and dividends. This shows that too complex arguments can ruin your case. With a simpler approach like in the Finnish case, we think the Commision would have won the argument of discrimination.