The scope of application of the VAT exemption for the management of AIFs has been extended to all AIFs within the meaning of Section 1 (3) KAGB from 2024, meaning that the previously applicable similarity test no longer applies. The tax authorities recently amended the VAT Application Decree (Umsatzsteuer-Anwendungserlass - UStAE) accordingly.
As part of the Future Financing Act (Zukunftsfinanzierungsgesetz), the scope of the VAT exemption under Section 4 no. 8 letter h of the German VAT Act (Umsatzsteuergesetz - UStG) was extended (see Legal Insights from December 18, 2023). The VAT exemption now covers management services (1) to undertakings for collective investment in transferable securities (UCITS) in accordance with Section 1 (2) of the German Investment Code (Kapitalanlagegesetzbuch - KAGB), (2) pension funds within the meaning of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz), and (3) management services to all AIFs within the meaning of Section 1 (3) KAGB.
Previously, the VAT exemption for the management of AIFs required that the respective AIFs were comparable to an UCITS in accordance with Section 1 (2) KAGB. Comparability was to be determined on the basis of criteria set out in the UStAE. With effect from January 1, 2024, the legal requirement of comparability will no longer apply, and the tax exemption will be granted for the management of any AIFs within the meaning of Section 1 (3) KAGB. This includes venture capital funds in particular, which in turn includes many venture capital funds and private equity funds.
With the German Ministry of Finance (BMF) decree dated May 17, 2024 (No. III C 3 - S 7160-h/22/10001 :16), the tax authorities have now adapted the corresponding regulations in the UStAE to the changed law.
The other regulations on the scope of VAT-exempt administrative services remain unchanged. Administrative services must therefore continue to be distinguished from, among other things, the safekeeping of assets, other activities of custodians, real estate management, investment management, and the distribution of such units, which are not tax-exempt in each case.
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