Copenhagen Economics has conducted a study on the investor impact of a reform of the investment tax legislation for the German Ministry of Finance.
A federal state working group has drafted a reform of the investment tax legislation focusing on the taxation of mutual funds. It implies that the current tax exemption at fund level is abandoned and replaced with a new system, which has three main elements:
- An introduction of a 15.825 percent tax on German source dividend and real estate income.
- Cancelation of tax exemptions for regular corporations and business investors.
- New elements that provide tax relief at investor level for pay-outs from German mutual funds.
The main conclusions are
- Investor return from mutual fund will drop between 24 and 30 basis points across different investor groups.
- Behavioural effects where fund structures or asset compositions change can reduce effects. If behavioural effects are included, the drop in effective return will be reduced by 30-50 percent.
- For charities, the most natural compensation mechanism would be to implement subsidies of the same size as the additional tax burden.
- For pension recipients, compensation can take place through focused reductions on pension contributions.
Download the full report (in German)
Download the executive summary (in English)
For further information, please contact Partner Sigurd Næss-Schmidt