Germany to Raise Tax On Foreign Real Estate Funds

by Ulrika Lomas, Tax-News.com, Brussels

18 April 2003

The German government intends to raise taxes on foreign property funds in its compromise tax reform package, it emerged this week.

The measure will affect both closed and open funds whose investors have, until now taken advantage of double taxation rules which effectively result in tax free investments.

Representatives from the German real estate sector fear that this will have a detrimental effect on investor confidence. Guenter Hauber, managing director of the Association of German Property Companies suggested this week that the tax will have a serious impact on the international competitiveness of German investments abroad, according to a Reuters report.

Last month the government was forced to shelve many of its tax proposals, including increased taxation on company cars, stock profits and subsidy cuts for first time home-buyers, after opposition in the Christian Democrat-dominated Bundesrat forced the streamlining of the package. The Schroeder administration had originally hoped that EUR15.6 billion could be raised from Finance Minister Hans Eichel's 40 point plan. However, the government was forced to settle for a much reduced figure of EUR4.4 billion.

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