In October 2017, the German Federal Financial Supervisory Authority (BaFin) submitted a draft of an interpretative decision commenting on the question whether, under the German Capital Investment Code, investment funds can also be acquired as real estate companies for open-ended retail real estate investment funds and for certain special AIFs. We reported on said draft in our beinformed on November 28, 2017. On April 10, 2018, the BaFin published the final version of the interpretative decision.

In our beinformed dated February 14, 2018, we presented a decision of the European Court of Justice (joint cases C 504/16 „Deister Holding“ and C 613/16 „Juhler Holding“) stating that the German anti-abuse rule of Section 50d (3) of the German Income Tax Act in the version of 2007, which denies refunds on withholding tax on dividends to European parent companies, violates European law. Specifically, the provision violates both the Parent-Subsidiary Directive and the freedom of establishment. Even though the decision immediately affects only assessment years until 2011, it further strengthens the already existing doubts that the current version of the German Income Tax Act is in line with European law. The German financial authorities have reacted to this decision and published a new circular on April 4, 2018, according to which Section 50d (3) of the German Income Tax Act in the version of 2007 is no longer applicable. The Circular also softens the impact of the current version of the provision.

About five years ago the European Court of Justice (ECJ) stated in an infringement proceeding against Germany (ECJ November 22, 2012 – C-600/10, OJ 2013 C 26/3) that the European Com­mis­sion could not prove a violation of EU law caused by the final withholding tax levied on German dividends received by foreign pension funds.

Recently the Fiscal Court of Munich again referred said question to the European Court of Justice (FG München October­23, 2017 – 7 K 1435/15). In this beinformed we explain why in our opinion this time a ruling approving that the final withholding tax in fact infringes the principle of the free movement of capital (Article 63 of the Treaty on the Functioning of the European Union) is highly likely.