Liability of an investment fund to corporate income tax

(1) Domestic investment funds are deemed funds of assets serving a specific purpose within the meaning of section 1(1) no. 5 of the Corporate Income Tax Act and are subject to unlimited liability to corporate income tax. Foreign investment funds are deemed funds of assets within the meaning of section 2 no. 1 of the Corporate Income Tax Act and are subject to limited liability to corporate income tax.
(2) Investment funds are, subject to the second sentence, exempt from tax. Domestic equity income, domestic real estate income and other domestic income are not exempt. The income taxable under the second sentence is at the same time domestic income within the meaning of section 2 no. 1 of the Corporate Income Tax Act.
(3) Domestic equity income is 1. income within the meaning of section 43(1), first sentence, nos. 1 and 1a of the Income Tax Act, 2. charges, income and receipts within the meaning of section 2 no. 2(a) to (c) of the Corporate Income Tax Act, and 3. income under nos. 1 and 2 earned through a partnership. The provisions on tax deduction under section 32(3) of the Corporate Income Tax Act apply accordingly.
(4) Domestic real estate income is 1. income from the letting and leasing of land or rights equivalent to land situated domestically, 2. profits from the disposal of land or rights equivalent to land situated domestically, 3. other income from letting and leasing under section 49(1) no. 6 of the Income Tax Act, 4. income under section 49(1) no. 2(e), double letter (cc) of the Income Tax Act, irrespective of whether the corporation has its seat or place of management domestically, and 5. income under nos. 1 to 4 earned through a partnership. Section 23(3), first to fourth sentences of the Income Tax Act applies accordingly to determining the profit under the first sentence, no. 2. Changes in value that occurred before 1 January 2018 are tax-free, provided the period between acquisition and disposal exceeds ten years.
(5) Other domestic income is 1. income under section 49(1) of the Income Tax Act, with the exception of income under section 49(1) no. 2 of the Income Tax Act, insofar as it is not covered by subsections (3) or (4), 2. income under section 49(1) no. 2 of the Income Tax Act, with the exception of income under section 49(1) no. 2(e) of the Income Tax Act, insofar as the investment fund actively manages its assets on an entrepreneurial basis, and 3. for domestic investment funds in the legal form of an investment stock corporation, also income earned by the investment stock corporation or one of its sub-funds from a) the management of its assets, or b) the use of its investment business assets under section 112(2), first sentence of the Capital Investment Code. Insofar as the income under the first sentence, no. 2 includes domestic equity income and domestic real estate income, these are subject to taxation as other domestic income. In the case of a holding in a co-entrepreneurship, active entrepreneurial management always exists, subject to subsection (5a), first sentence, no. 3.
(5a) There is no active entrepreneurial management insofar as an investment fund 1. grants loans exclusively to persons who are not consumers within the meaning of section 13 of the German Civil Code, 2. holds interests in corporations directly, unless the interests are acquired with the intention of realising disposal gains after a short holding period, or 3. holds interests directly in partnerships treated as commercial by infection or by legal form within the meaning of section 15(3) of the Income Tax Act, and the investment fund or the competent tax authority demonstrates that the income of the partnerships derives from asset-managing activities. Where, in the cases of the first sentence, no. 3, it is demonstrated that the income derives from an asset-managing activity, other domestic income under subsection (5), first sentence, no. 1 exists, insofar as the income of the partnership, disregarding section 15(3) of the Income Tax Act, would be income within the meaning of section 49(1) of the Income Tax Act, with the exception of section 49(1) no. 2 of the Income Tax Act, and is not covered by subsections (3) or (4).
(6) Section 8b of the Corporate Income Tax Act does not apply.
(6a) The acquisition or disposal of a direct or indirect holding in a partnership is deemed the acquisition or disposal of the proportionate assets.
(7) The income is to be determined as the excess of income over income-related expenses that are economically connected with the income. Section 4(5) to (7) of the Income Tax Act applies accordingly in determining the income under the first sentence. For income subject to a tax deduction, the deduction of income-related expenses and set-off against negative income is excluded. Where the investment fund's financial year differs from the calendar year, the investment fund's income is deemed received in the calendar year in which its financial year ends. The third sentence does not apply to other domestic income under subsection (5), first sentence, nos. 2 and 3.
(8) Negative income not offset is to be deducted in the following assessment periods. Section 10d(4) of the Income Tax Act applies mutatis mutandis.