GERMANY Law and Practice Contributed by: Tarek Mardini, Antonia Puglisi and Enzo Biagi, POELLATH
If the alternative fund is structured as a corporation, or as a contractual-type fund, the specific double-tax treaty may be applicable to the fund itself, but this will have to be analysed for each specific treaty and legal form of the fund on a case-by-case basis. In certain cases, domestic laws may override double- tax treaties. 4.10 Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standard (CRS) Compliance Regime Regarding FATCA (the Foreign Account Tax Compli - ance Act), Germany has signed an intergovernmental agreement (IGA) with the USA based on the Model 1 IGA. As a result, German funds are “deemed compli - ant” but certain information has to be provided to the German tax authorities. Germany has transposed the agreement with the USA into German national tax law and the German tax authorities have issued a clarify - ing FATCA ordinance. Germany has also implement - ed the CRS (Common Reporting Standard) rules into German tax laws. The German tax authorities issued further administrative guidance on both FATCA and the CRS in late 2017 and in June 2022. Both FATCA and the CRS oblige all German funds and their fund managers to comprehensively screen their investors, collect information about non-resident investors (and their ultimate beneficial owners), and report this information to the Federal Central Tax Office ( Bundeszentralamt für Steuern or BZSt), together with information about the participation of such persons/ entities. This information will be passed on to the US (in the case of FATCA) or to other European countries (in the case of the CRS). 4.11 Anti-Money Laundering (AML) and Know Your Customer (KYC) Regime During the subscription process, managers have to carry out anti-money laundering checks in accordance with the provisions of the German Money-Laundering Act ( Geldwäschegesetz or GwG). For this purpose, the identity of the investors, any person acting on their behalf and their beneficial owners must be verified and, generally, transmitted to the transparency reg - ister. Managers are also required to appoint an AML officer and a deputy, who are entrusted in particular with the following tasks:
• to conduct a risk analysis, which includes a com - plete assessment of all risks related to money laundering and terrorist financing; • to create, monitor and further develop a company- specific risk management system towards AML; and • to communicate on all money-laundering issues within the company (ie, both with the management and employees). A money-laundering check is run largely in parallel with the determination of controlling persons as part of the FATCA/CRS check. As the manager is obliged to check the self-disclosures for FATCA and CRS pur - poses for obvious inconsistencies, an inner conform - ity check should also be carried out between AML disclosures and FATCA/CRS disclosures. Since August 2021, sub-threshold AIFMs (not the AIFs themselves) are required to instruct a qualified independent third party (eg, an auditor) to audit how funds are being used pursuant to the German Invest - ment Code (Section 45a KAGB). The AIFM must notify BaFin about the appointed auditor. In the audit report, the auditor must state separately whether the AIFM has complied with its obligations under the KAGB and the GWG. The report is to be submitted to BaFin by the auditor. In the event that the AIFM does not pro - vide the auditor with sufficient information, or does not provide it correctly, completely or in a timely manner, a fine of up to EUR1 million may be imposed; and in the case of legal entities, a fine of up to 2% of the total annual turnover may also be imposed. 4.12 Data Security and Privacy for Investors The requirements for data security and privacy com - pliance are primarily determined by the General Data Protection Regulation (GDPR). Managers regularly request the investor’s consent to the processing of personal data in the course of the subscription pro - cess, even if such consent is often not required due to applicable carve-outs in statutory law. However, managers must comply with their transparency obli - gations and comprehensively inform investors about the processing of their personal data and their rights in this context (eg, to rectification, blocking or dele - tion) in accordance with the provisions of the GDPR.
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