Application and transitional provisions on the Investment Tax Reform Act

(1) The provisions of this Act in the version in force on 1 January 2018 apply from 1 January 2018. For the time before 1 January 2018, and for differences under section 5(1), first sentence, no. 5 and section 13(4) of the Investment Tax Act in the version in force on 31 December 2017, published for financial years ending before 1 January 2018, the Investment Tax Act in the version in force on 31 December 2017 continues to apply. For investment funds and capital investment companies under the Investment Tax Act in the version in force on 31 December 2017 with a financial year differing from the calendar year, a rump financial year is deemed to have ended, for tax purposes, on 31 December 2017. For rump financial years under the third sentence, the period for publication of the bases of taxation under section 5(1), first sentence, no. 3, first sentence of the Investment Tax Act in the version in force on 31 December 2017 is extended until 31 December 2018. By way of derogation from the first sentence, the provisions of this Act in the version amended by Article 15 of the Act of 11 December 2018 (Federal Law Gazette I, p. 2338) apply to investment income accruing, or deemed to accrue, after 10 August 2018, and to valuations under section 6 of the Income Tax Act to be made after that date.
(1a) For investment funds established before 1 January 2019, investment conditions satisfying the conditions of section 2(6) in the version of Article 1 of the Act of 19 July 2016 (Federal Law Gazette I, p. 1730) are deemed investment conditions satisfying the conditions of section 2(6) in the version of Article 15 of the Act of 11 December 2018 (Federal Law Gazette I, p. 2338). The first sentence applies accordingly to investment funds established before 1 January 2019 that satisfy the conditions of section 2(7) or (9).
(2) Units in investment funds, in capital investment companies under the Investment Tax Act in the version in force on 31 December 2017, or in undertakings first falling within the scope of this Act on 1 January 2018 (legacy units), are deemed disposed of at the end of 31 December 2017 and acquired at the beginning of 1 January 2018. The last redemption price fixed in calendar year 2017 is to be applied as disposal proceeds and acquisition cost. Where no redemption price is fixed, the exchange or market price takes the place of the redemption price. The value of the legacy units determined under the second and third sentences is deemed acquisition cost within the meaning of section 6(1) no. 2, first sentence of the Income Tax Act. Insofar as the value of the legacy units determined under the second and third sentences is higher than the carrying amount of the legacy units on 31 December 2017, diminutions in value within the meaning of section 6(1) no. 2, second sentence of the Income Tax Act are to be taken into account only at the time of the actual disposal of the legacy units. Recoveries of value within the meaning of section 6(1) no. 2, third sentence in conjunction with no. 1, fourth sentence of the Income Tax Act are to be taken into account only at the time of the actual disposal of the legacy units, insofar as the fifth sentence was applied to the previous diminutions in value and insofar as the carrying amount of the legacy units as at 31 December 2017 is exceeded. The carrying amount of the legacy units as at 31 December 2017 is to be determined without taking into account the notional disposal under the first sentence.
(3) The profit from the notional disposal under subsection (2), first sentence, determined under the provisions in force on 31 December 2017, including off-balance-sheet additions and deductions, is to be taken into account at the time the legacy unit is actually disposed of. On an actual disposal of legacy units, the units first acquired are deemed first disposed of. The profit from the notional disposal under subsection (2), first sentence is, at the time of the actual disposal of the legacy unit, subject to the tax deduction under section 43(1), first sentence, no. 9 of the Income Tax Act. Where the profit from the notional disposal cannot be determined, 30 per cent of the redemption price, or, where no redemption price is fixed, of the exchange or market price, is to be applied as the basis of assessment for the tax deduction (substitute basis of assessment). On application of the substitute basis of assessment, the discharging effect under section 43(5), first sentence, first half-sentence of the Income Tax Act is excluded, and the withholding agent is obliged to issue a tax certificate under section 45a(2) of the Income Tax Act in which the application of the substitute basis of assessment must be indicated. The income deemed to have accrued but not yet subject to the tax deduction under section 7(1), first sentence, no. 3 in the version in force until 31 December 2017, and the accrued income under section 7(1), first sentence, no. 4 in the version in force until 31 December 2017, are, at the time of the actual disposal of the legacy unit, subject to the tax deduction under section 43(1), first sentence, no. 5 of the Income Tax Act. The preceding sentences do not apply to the profit from the notional disposal under subsection (2), first sentence, where the profit is attributable to an investment fund or a special investment fund.
(3a) For the purposes of subsections (2) and (3), a notional disposal under section 19(2) or (3), section 49(5) or section 52(2) is equivalent to an actual disposal.
(4) The domestic body holding or managing the legacy units must, by 31 December 2020, determine and hold, until the actual disposal, the following: 1. the profit from the notional disposal under subsection (2), first sentence, and 2. the income under section 7(1), first sentence, nos. 3 and 4 of the Investment Tax Act in the version in force until 31 December 2017. The domestic body must, on application, notify the taxpayer of the particulars under the first sentence, no. 1. Where the investor transfers the legacy units to another custody account, the transferring domestic body must notify the particulars under the first sentence to the receiving domestic body.
(5) The profit under subsection (3), first sentence must be separately determined where the legacy units form part of the investor's business assets. For the purposes of the first sentence, a co-entrepreneurship is deemed an investor. For a joint ownership that is not a co-entrepreneurship, its participants are, for the purposes of the first sentence, deemed the investor. The investor must transmit a declaration for the separate determination of the profit under subsection (3), first sentence, at the earliest after 31 December 2019 and at the latest by 31 December 2022, by remote data transmission, on the officially prescribed data set. The investor must itself determine the profit under subsection (3), first sentence in the determination declaration. The determination declaration is equivalent to a separate determination subject to review; an amended determination declaration is deemed an application for amendment. The provisions of the Fiscal Code applicable to tax declarations apply accordingly. On application, the tax authority may, to avoid undue hardship, waive electronic transmission; in that case the declaration for separate determination is to be submitted on the officially prescribed form and personally signed by the investor. The tax office competent for the investor's taxation by income has jurisdiction for the separate determination of the profit under subsection (3), first sentence. In the cases of section 180(1), first sentence, no. 2 of the Fiscal Code, the tax office competent for the separate determination under section 18 of the Fiscal Code has jurisdiction for the separate determination of the profit under subsection (3), first sentence. For legacy units disposed of before 1 January 2023 and before the submission of the determination declaration, no declaration is to be submitted and no determination is to be made. Section 180(3), first sentence, no. 2 and second and third sentences of the Fiscal Code apply accordingly.
(6) For legacy units acquired before 1 January 2009 and not held as business assets since acquisition (grandfathered legacy units), 1. changes in value that occurred between the time of acquisition and 31 December 2017 are tax-free, and 2. changes in value that occurred from 1 January 2018 are taxable, insofar as the profit from the disposal of grandfathered legacy units exceeds EUR 100,000. The allowance remaining under the first sentence, no. 2 at the end of the assessment period is to be separately determined annually until fully used. The remaining allowance is, in the year of first use, the amount of EUR 100,000 reduced by the allowance under the first sentence, no. 2 taken into account in determining the income; in subsequent years, the remaining allowance is the remaining allowance determined at the end of the previous assessment period, reduced by the allowance under the first sentence, no. 2 taken into account in determining the income. The tax office competent for the investor's taxation by income has jurisdiction for the separate determination of the remaining allowance. Section 10d(4), fourth to sixth sentences of the Income Tax Act applies accordingly. Units within the meaning of section 21(2a) and (2b) of the Investment Tax Act in the version in force until 31 December 2017 are not grandfathered legacy units within the meaning of the first to fifth sentences.
(7) Ordinary legacy income is deemed deemed-distributed income accrued to the investors at the end of the financial year in which it was received, where it is not distributed and accrues to the investors before 1 January 2018. Insofar as an investor holds a unit in a special investment fund uninterruptedly from the day on which the special investment fund's financial year ended after 30 June 2017 until 2 January 2018, the deemed-distributed income attributable to it under the first sentence, received in a financial year ending after 30 June 2017, is deemed to have accrued on 1 January 2018. The deemed-distributed income under the first and second sentences is subject to taxation under the Investment Tax Act in the version in force on 31 December 2017 and under the Income Tax Act in the version in force on 26 July 2016. The deemed-distributed income under the second sentence may be distributed as deemed-distributed income of prior years within the meaning of section 35(5). Ordinary legacy income is income of the kind named in section 1(3), third sentence, nos. 1 and 2 and fourth sentence of the Investment Tax Act in the version in force on 31 December 2017 that the investment fund or the special investment fund received before 1 January 2018.
(8) Extraordinary legacy income, deemed-distributed income deemed to have accrued before 1 January 2018, depreciation amounts attributable to periods before 1 January 2018, negative income not set off under section 3(4), second sentence of the Investment Tax Act in the version in force on 31 December 2017, and other values determined for periods before 1 January 2018, are not to be taken into account for the application of this Act in the version in force on 1 January 2018. Extraordinary legacy income is income whose type does not fall under section 1(3), third sentence, nos. 1 and 2 and fourth sentence of the Investment Tax Act in the version in force on 31 December 2017, and that was received by the investment fund or the special investment fund before 1 January 2018. In determining the fund equity gain, the fund treaty gain and the fund partial-exemption gain, the profits realised, the changes in value occurring, and the income received before 1 January 2018 are not to be taken into account.
(9) Capital amounts are deemed special investment income under section 34(1) no. 1 insofar as the investor has a positive profit under subsection (3), first sentence. They are not subject to the tax deduction under section 50.