Investment income

(1) Income from investment funds (investment income) is 1. distributions of the investment fund under section 2(11), 2. advance lump sums under section 18, and 3. profits from the disposal of investment units under section 19.
(2) Investment income is not to be taken into account where the investment units are held within the framework of retirement provision or basic pension contracts certified under section 5 or section 5a of the Retirement Savings Contracts Certification Act. Advance lump sums are not to be taken into account where the investment units are held 1. within the framework of occupational retirement provision under the Company Pensions Act, 2. by insurance undertakings within the framework of insurance contracts under section 20(1) no. 6, first and fourth sentences of the Income Tax Act, or 3. by health and long-term care insurance undertakings to secure ageing provisions.
(3) Section 3 no. 40 of the Income Tax Act and section 8b of the Corporate Income Tax Act do not apply to investment income from investment funds.
(4) Where the distribution of a foreign investment fund is to be excluded from the basis of assessment of the German tax under a double taxation agreement, the exemption is granted, notwithstanding the agreement, only where 1. the investment fund is subject to general income taxation in the state to which the right of taxation accrues under the agreement, and 2. the distribution is based to more than 50 per cent on income of the investment fund that is not exempt from tax. The first sentence also applies where, under the agreement, taxation of the distribution in that state may not exceed 0 per cent. General income taxation is presumed where the investor demonstrates that the investment fund is subject to income taxation of at least 10 per cent and is not exempt from it.