Cross‑Border Tax Forecast 2026 in Germany

Amendment of chapter 3 of the German Investment Tax Act (GITA).

Under the so-called Location Promotion Act (Standortfördergesetz), the catalogue of assets that can be acquired by semi-transparent special investment funds under chapter 3 of the GITA is being adjusted to simplify the acquisition of target investment funds. Where target funds previously had to comply with the investment principles of Sec. 26 GITA to be eligible for special investment funds, and therefore a comprehensive review of their structure and investment activity was required, the list of investable assets has now been broadened, meaning that all investment funds within the meaning of Sec. 1 of the German Capital Code are now generally acquirable.

The broadened investment scope could lead to a reorientation of the market towards the increased use of the special investment fund regime under chapter 3 GITA. Due to their semi-transparency, certain items of income could be subject to a preferential tax treatment when compared to fully opaque chapter 2 investment funds or investment funds organised in the legal form of partnerships, the latter often being subject to potentially non-deductible German trade tax.

• Monitor and analyse the tax burdens of existing fund structures compared to a shift towards chapter 3 investment funds and examine potential optimisation in future structures with competent investment tax experts
• The portfolio of target assets for existing chapter 3 investment funds can be broadened due to the new legislation

Potential increase in minimum tax rate from 7% to 9.8% for municipal trade tax.

The trade tax rate is generally dependent on the local tax rate of the municipality in which a permanent establishment (PE) is located. While not yet formally decided, the German government is planning to increase the minimum municipal trade tax rate.

An increased trade tax rate could impose additional economic burdens on clients operating in a municipality with a current trade tax rate below 9.8%.

Clients affected by an increased trade tax rate should consider potential shifts in tax-driven location factors and liaise with tax experts regarding the factual requirements for maintaining a PE in a municipality in order to avoid conflicts with German tax authorities.