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German Tax Documents
As required under the new German Investment Tax Act (GITA) that became effective on January 1, 2018 funds that once were considered transparent are now considered opaque and will generally be taxed on a lump sum basis. The taxable amount for the German investors resulting from a fund investment is called “preliminary lump-sum” (Sec. 18 GITA). This preliminary lump-sum is calculated as follows: NAV of the fund at the beginning of the calendar year multiplied by 70% of an official published interest rate, but limited to the actual increase in value during the calendar year (including distributions). Hence distributions will be deducted from the tax basis of the annual lump sum amount. Fund distributions if any are always taxable.
For the year 2018 this interest rate was 0,87%. That means that for 2018 maximum 0,609% of the NAV as of January 1, 2018 is taxable income for the German investor (e.g. if there was no increase in value during the year 2018, the German investor had no taxable amount). Following this, the actual taxable amount can be determined after NAV of December 31, 2018. Please note that the preliminary lump-sum is only taxable as at January 1, 2019. Fund distributions if any are always taxable.
For the year 2019 the interest rate was 0,52%. That means that for 2019 maximum 0,364% of the NAV as of January 1, 2019 is taxable income for the German investor if again the value of the investment has increased during the year (e.g. if there is no increase in value during the year 2019, the German investor has no taxable amount).
For the years 2020 and 2021, the interest rates are 0,07% and 0%, respectively.
If the fund units are with a German depositary bank of the German investor, the bank will calculate the preliminary lump-sum because this amount is the basis for the withholding tax. German banks are obliged to withhold taxes on the preliminary lump-sum from 2018 on. If there is no German depositary bank the German investor has to include the preliminary lump-sum in their tax return.
Kindly be advised that this information does not constitute as tax advice, please consult your tax advisor.