Lower Saxony Court Rules Carried Interest Exempt from VAT

• The Lower Saxony Tax Court ruled that carried interest paid to fund managers is not subject to VAT.
• It found no direct link between fund management services and carried interest payments, since the payments depend on overall economic performance rather than fixed service fees.
• This is consistent with ECJ case law (C-16/00, Cibo Participations), which says general profit participation is not taxable consideration for VAT.
• The ruling applies to ongoing, exit, and liquidation carry arrangements if payment is based on performance.
• German funds that previously paid VAT on carried interest should review possible refund claims within the limitation period.

Source: aoshearman.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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