Tax Authority Imposes Border Closure: This Dichotomy in Finances and Exchange-Traded Funds is Significant for the Fiscal Sector
Breaking Down Exit Taxes for Investment Funds in Germany
Leaving Germany might come with an unexpected cost - an exit tax on your fund shares under specific conditions, and the type of fund you hold makes a difference. Here's what you need to know.
Background
Previously, private individuals had to pay taxes on the value increase of their shares in capital companies, similar to a fictitious sale profit, when they moved abroad. This regulation was part of the Foreign Tax Act.
Change
With the Tax Act 2024, this rule is now extended to investments in investment funds and special investment funds. Tax consultant Alexander Kimmerle from Ecovis society in Kempten explains, "Only significant cases will be covered, notably when the investor holds a substantial shareholding."
Taxation Criteria
Significant is the shareholding if the taxpayer has held directly or indirectly at least 1 percent of the issued investment shares of an investment fund in the last five years before leaving. Additionally, the new regulation applies if the investor didn't meet this shareholding threshold but spent at least 500,000 euros on the shares.
Distinction by Fund Type
For investments in special investment funds, significant shareholding is usually assumed. No capital gains tax deduction is provided for exit taxation. "The investor must pay the exit tax within their income tax return," explains Kimmerle.
Key Takeaway
With the Tax Act 2024, emigrating investors in Germany need to be aware of the potential exit tax on their investment funds and special investment funds. It's advisable to consult a tax professional for accurate information based on individual circumstances.
Additional Insights
Germany has made numerous tax-related changes recently, such as updates to the GoBD and discussions about economic growth initiatives. However, specific details about regulations for investment funds and special investment funds in the context of the Tax Act 2024 are not readily available. For comprehensive information, it's recommended to consult official German tax authority publications.
Investors who emigrate from Germany might face an exit tax on their shares in investment funds or special investment funds, as per the Tax Act 2024. This tax applies when an individual holds a significant shareholding in investment funds for the last five years before leaving, or has invested at least 500,000 euros in shares, regardless of shareholding percentage. For special investment funds, the investor is expected to pay the exit tax within their income tax return, and no capital gains tax deduction is provided.
