On March 11, 2015 the German Supreme Tax Court ruled that income included in the tax basis of a German taxpayer under the German CFC rules acc. to Sec. 10 Para 1 Sent 1 German Foreign Tax Act will remain foreign source income. Because German trade tax is only on income generated in Germany such CFC add-backs are to be excluded from the German trade tax base acc. to Sec. 9 No 3 Sent 1 German Trade Tax Act.  

The European Securities and Markets Authority (ESMA) has published its Advice in relation to the application of the Alternative Investment Fund Managers Directive (AIFMD) passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative Investment Funds (AIFs). ESMA’s Advice addresses only six jurisdictions. ESMA does not currently advise the application of the EU passport for US AIFs and US AIFMs.

It has now been two years since the last substantial amendments of the German tax rules for investment funds. Now again everything is on the table, this time it goes to the heart of the matter. What the fiscal authority is asking for is a fundamental change of fund taxation: taxation at fund level on the basis of a source historically used for non-residents, however, plus the traditional taxation based on residence for German investors in the fund. Thus, conflicts with souvereignty of taxation between Member States of the European Union are resolved to the advantage of the national tax authorities instead of supporting a European-wide solution regarding the question of whether to base fund taxation either on the source or on the residence principle.