Germany Implements VAT Exemption for Management of Alternative Investment Funds

• Germany has revised its VAT law to exempt the management of Alternative Investment Funds (AIFs) from VAT.
• This change will be applicable from 1 January 2024.
• Previously, only certain types of investment funds were exempt from VAT, but now all AIFs will benefit from the exemption.
• The exemption covers management services provided by the German Capital Management Company (KVG) to the funds it oversees, as well as third-party services related to asset management.
• The exemption does not apply to services related to the distribution of fund units.
• The VAT exemption will have a positive impact on AIFs, as it will reduce costs and increase available capital for investment.
• However, it will have a negative impact on the KVG, as it will result in the loss of input VAT recovery for tax-exempt services.
• German asset managers and investment advisors of AIFs will lose their right to recover input VAT, requiring a review of existing service agreements.
• Rental agreements should also be reviewed for potential clauses on contractual penalties or compensation claims.

Source: wts.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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