June 9, 2016 / 5:51 PM / 3 years ago

German parliament approves reform of investment tax rules

BERLIN, June 9 (Reuters) - German lawmakers approved legislation on Wednesday which will grant foreign investors the same tax status as domestic investors, in a preemptive move to avert intervention from the European Union.

Under current law, domestic funds are exempt from paying corporate income tax on revenue related to dividends and real estate, while foreign funds are required to pay a 15 percent tax rate on such gains.

Similar tax regimes in Poland and France have been overturned by the European Court of Justice, prompting Berlin to act.

Senior government officials have said the new legislation is aimed at closing a loophole that allowed unequal treatment of foreign and domestic investors, therefore reducing legal risks stemming from the European Union.

Under the new law, shareholders will be eligible for tax rebates only if the stocks are held 45 days before and after the dividend payout date.

The current system had allowed banks to “borrow” stocks owned by foreign shareholders before the dividend payment date for a small fee, allowing them to collect the dividend and then request tax rebates.

The new regulation is expected to be in place by January 2018. (Reporting by Matthias Sobolewski and Michael Nienaber, editing by David Evans)

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