GERMANY Law and Practice Contributed by: Tarek Mardini, Antonia Puglisi and Enzo Biagi, POELLATH
ernment under the initiative of the German Federal Ministry of Finance published the second attempt at an AIFMD II implementation law. The so-called German Act to Limit the Risks of Investment Funds ( Fondsrisikobegrenzungsgesetz ) aims to implement the AIFMD II on a one-to-one basis, without additional national requirements (“gold plating”). Compared to the old draft law, the new proposal is indeed closer to the original text of the AIFMD II. Even though the new draft law rejects some instances of gold plating compared to the old draft, it also introduces new regu - lations that are considered gold plating. As the new draft law is currently under consultation, it remains to be seen to what extent such gold plating will be transcribed into the final text of the law. The good news is that a timely implementation of the AIFMD II in Germany is very likely. ELTIF 2.0 Regulation (EU) 2023/606 (the “ELTIF 2 Regulation”), amending Regulation (EU) 2015/760 of April 2015 on European Long-Term Investment Funds (ELTIFs) was published in the Official Journal of the European Union on 20 March 2023 and came into force on 10 Janu - ary 2024. The ELTIF 2 Regulation aims at opening the private capital market to retail investors by, among other things, broadening the scope of eligible assets and investments and allowing for more flexible fund rules, including fund-of-fund strategies. Due to the elimination of portfolio composition, diver - sification and concentration provisions, for example, by raising the leverage limitation of 30% of the fund’s capital to 100% for ELTIFs that are marketed solely to professional investors, the revised regime will also become more attractive to professional investors. At the same time, the scope of eligible assets and investments has been expanded, and the rules gov - erning diversification and borrowing have been relaxed for retail ELTIFs. In addition, the borrowing limits have been increased to up to 50% of the ELTIF’s net asset value (NAV), while the requirement for eligible assets to represent at least 55% of the ELTIF’s net assets has been reduced from 70%. Further, in relation to indirect strategies, an ELTIF can now act as a feeder to another master ELTIF, and fund-
of-funds structures are now possible with any type of European underlying fund (up to 100% of the assets and a maximum of 20% exposure to the same fund). This enables managers to offer retail investors indirect access to funds that were not previously accessible to them, or not available at all. The German regulator published an FAQ on future German regulatory guidance regarding the ELTIF 2 Regulation on 1 February 2024. The purpose of the FAQ is to answer certain open questions from the ELTIF 2 Regulation itself. Anti-Tax Avoidance Directive The latest Anti-Tax Avoidance Directive (ATAD) imple - mentation law came into force on 1 July 2021. This covers both the ATAD I Directive (EU) 2016/1164 of 12 July 2016 concerning, in particular, interest barri - ers, rules on exit taxation, general abuse avoidance rules and CFC (controlled foreign corporation) rules, and the ATAD II Directive (EU) 2017/952 of 29 May 2017 concerning hybrid arrangements, both resulting in several restrictions for companies operating across borders. A positive clarification for AIFs in a corporate form is that the specialised CFC rules do not apply to income received in respect of a foreign intermediate company that falls within the scope of the Investment Tax Act. The new law provides for a limitation of the taxation privilege on capital gains in certain cross- border cases (Section 8b of the German Corporation Tax Act). Although the ATAD III proposal was initially intended to take effect on 1 January 2024, it has now been officially withdrawn at the European level. Neverthe - less, it remains to be seen to what extent the objec - tives pursued by ATAD III – particularly regarding the use of shell companies – will be taken up in future legislative initiatives. In this context, it is likely that certain elements of the ATAD III proposal will resurface in other EU initiatives, such as future amendments to the Directive on Administrative Cooperation (DAC). In any case, it is clear that substance requirements for EU-based entities will certainly not become less stringent.
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