Key facts at a glance
- The MinStAnpG introduced a fundamental amendment to Section 13 AStG, which should generally result in the CFC taxation no longer being applicable in the private equity context.
- The amendment to Section 13 AStG also affects the extent of the German trade tax exemption pursuant to Section 9 no. 2 GewStG and may result in substantial trade tax refunds.
- In addition, the German tax authorities have now accepted the established case law of the BFH regarding the so-called upward infection of partnerships, which should be particularly beneficial for German fund-of-funds structures.
Extended CFC taxation pursuant to Section 13 AStG
As part of the MinStAnpG, Section 13 AStG was amended. As a result, the extended CFC taxation rule should generally no longer be applicable to private equity funds and their investors.
The provision now applies only if there is a direct or indirect participation of at least 10% in a foreign company that generates low-taxed investment income. As investors in private equity funds are typically holding interests significantly below the 10% threshold, the extended CFC taxation rule should no longer be of material practical relevance.
As the amendment applies retroactively for all years from 2022, it should be examined whether retroactive corrections are possible.
German trade tax exemption
The amendment to Section 13 AStG also directly affects the German trade tax treatment of domestic investors receiving income from foreign (deemed) trading partnerships.
As the participation threshold has been increased to 10%, the proportional limitation of the German trade tax exemption pursuant to Section 9 no. 2 GewStG should no longer apply in many fund structures, meaning that such income should no longer be subject to German trade tax.
As the amendment applies retroactively for assessment periods from 2022 onwards, it should be reviewed whether amendments of previously issued tax assessments are possible. This may result in significant trade tax refunds.
Upward infection of partnerships and German trade tax
The BFH has long held the view that a partnership that is only trading due to upward infection does not constitute a separate German trade tax subject.
At the end of 2025, the German tax authorities withdrew the previously valid non-application decree and now apply the BFH case law across the board. This development may be particularly relevant for German fund-of-funds structures.
If a fund-of-funds is only upward infected and not (deemed) trading, no German trade tax should arise at the fund-of-funds level, while the income tax treatment generally remains unchanged, as long as the fund retains its trading qualification due to a participation in a trading partnership.