An investment fund in liquidation is subject to a special taxation regime under the new Investment Tax Act (InvStG), which has been in force since 1 January 2018. Investment funds are normally subject to deduction of capital gains tax with their distributions, if necessary by applying a partial exemption. In the case of investment funds in liquidation, this is only the case in accordance with section 17 of the InvStG to the extent that the distributions contain the appreciation in value for a calendar year.
In order to determine this increase in value, section 17(1) of the InvStG states that the total distributions for a calendar year must be calculated and added together with the last redemption price determined in the calendar year. If the resulting total exceeds the first redemption price fixed in the calendar year, the difference is the appreciation in value. Only this difference is subject to capital gains tax and solidarity surcharge. Full withholding tax is initially deducted on final or interim distributions made during the year. At the end of the calendar year, a comparison is then made to determine the extent to which an appreciation in value has actually occurred in relation to the calendar year or a tax-free distribution of assets has taken place.
Income paid by funds in liquidation during the year is initially taxed like any other distribution at the time of distribution. Custodian institutions can only assess whether this income was a distribution of assets (tax-free) or an increase in value (taxable) in the tax year after WM Datenservice® has provided the data. As a rule, this data delivery will take place in Q1 of the following year. After receiving the data, the custodian will calculate the correct tax burden, taking into account the taxes already paid on the income. Corresponding adjustment postings may therefore be made.
In order to take into account the situation of the funds in liquidation, a special regulation was provided for in the law with § 17 InvStG 2018, which results in tax-free distributions of assets over a period of approximately 5 years from the beginning of liquidation.
Always up-to-date fund information is available on the website of the responsible capital management company.
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