German legislation impacts portfolio investments and real estate transfer tax structures

March 2013

Overview

A German tax bill dealing with portfolio investments is expected to be enacted in the next two weeks. The bill will abolish the participation exemption for dividends received by portfolio investments. Capital gains realized upon disposal of portfolio investments generally will still qualify for the 95% participation exemption, if certain conditions are met.

The upper house of the German legislature has proposed a new Tax Bill 2013 that, like the previous version rejected by both houses of the legislature, contains provisions addressing the use of specific real estate transfer tax blocker structures, the use of hybrid instruments in German outbound structures, and loss utilization limitations following reorganizations.

These bills could be of particular interest to US multinational corporations with German investments. This newsalert reviews the current status of the two bills and the most important potential revisions to German tax law.

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