The draft bill presented by the Federal Ministry of Finance on 2 December initially proposes various amendments to the German Investment Act (KAGB), including the authorisation of new types of funds such as a contractual closed-ended special AIF or closed-ended master-feeder structures, but also the introduction of the new type of fund, open-ended infrastructure fund. In addition, communication with BaFin is to be switched to electronic formats as far as possible, which should create more flexibility for fund managers in particular in the event of changes in investment conditions. Furthermore, the implementation of an EU directive will include regulations for so-called pre-marketing. Outside the KAGB, an amendment to the German Value Added Tax Act is planned: The management fee in venture capital funds is to be exempted from VAT, as is already the case with open-ended funds.
BAI's managing director Frank Dornseifer comments on the submitted draft law as follows: " BAI has been advocating competitive framework conditions for the alternative investment industry and its investors for years. This is mainly about more flexibility in the organisational forms for alternative investment funds, a synchronisation of supervisory and tax law, and the coordination with investment-relevant regulations for investors, e.g. in insurance supervisory law. In our opinion, the fact that a law called the “Fondsstandortgesetz” is now being introduced is an important signal. However, the content of the legislative package appears to be more of a reparatory law, which is intended to rectify obvious omissions from the past".
From BAI's point of view, a programmatic and visionary draft would have been necessary now, especially in view of the fact that important parts of asset management have already migrated to other jurisdictions. Such a draft could show, virtually from a single source, how Germany as a location for funds is to be made competitive for the year 2025 and beyond. BAI also finds it incomprehensible that only two weeks of consultation are granted for the draft.
BAI managing director Dornseifer further states: "Unfortunately, the design also contains technical flaws which devalue the design. These include the isolated tax exemption for venture capital funds, which not only leaves it completely unclear which funds are to be covered in concrete terms, but also clearly violates EU (state aid) law. The whole thing becomes even more questionable when one considers that other funds, such as those financing German SMEs or infrastructure projects, are not to be covered by the VAT exemption. Politicians, in particular, are constantly complaining that these financing schemes need to be strengthened and expanded. And now this faux pas. I am also very critical of the regulations on so-called pre-marketing. This unnecessarily bureaucratises sales to institutional investors".
The BAI therefore sees an urgent need for adaptation not only of the draft, but also beyond it, such as the law on the introduction of electronic securities. Fund shares must also be included in the scope of application. Other jurisdictions are already much further along, while in Germany the discussion on this issue has just hit a dead end.
Bundesverband Alternative Investments e.V. (BAI)
- Managing Director -
Poppelsdorfer Allee 106
Tel.: +49 (0)228-96987-50
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