Equity Participation Rate under InvStG: new in our offering
Fenion now calculates the capital participation ratio under the German Investment Tax Act on every valuation day. It is a figure that decides the partial exemption available to your investors – and one that, in many houses, is still worked out by hand and spread across several departments.
What it is about
The German equity ratio – referred to in the Investment Tax Act as the capital participation ratio – determines how a fund is classified for tax purposes. A fund qualifies as an equity fund if, under its investment conditions, it continuously invests more than 50 percent of its gross assets in capital participations; as a mixed fund from 25 percent (sec. 2 (6) and (7) InvStG).
The partial exemption under sec. 20 InvStG follows from that classification: for equity funds 30 percent of income is exempt, 60 percent for individuals holding the units as business assets and 80 percent for investors subject to corporate income tax. For mixed funds, half of each rate applies.
What we take on
We calculate the equity fund and mixed fund capital participation ratio on every valuation day, per fund and share class, classify each position under sec. 2 (8) InvStG and resolve target funds either by look-through or via their published actual ratio. Where target fund data is missing, we draw on our own fund database.
Beyond the calculation itself, we deliver two things that make the difference in practice. Threshold monitoring shows the headroom to the limit before it becomes critical. And an audit-proof time series per valuation day documents without gaps where the ratio stood and when – which you need not only in a tax audit, but also when investors want to demonstrate under sec. 20 (4) InvStG that the ratio was in fact continuously exceeded during the calendar year.
We deliver the ratio in the format of your choice, including via FundsXML – for funds of funds, depositaries and data vendors.
Who the service is for
For investment management companies that determine and publish the ratio for their own funds. For fund-of-funds managers who depend on the ratios of their target funds. And for depositaries and institutional investors who need to follow or verify a classification.
As with all our services: we calculate, monitor and document. The tax assessment and the responsibility for the classification remain with you and your tax adviser.
