- Is there a specific tax regime for carried interest in your jurisdiction?
- What is the applicable tax treatment?
- Under which conditions are the regime applicable?
- Who are the beneficiaries?
- Which types of funds are concerned?
- Is carried interest subject to social security in your jurisdiction?
- Any other key information?
jurisdiction
1. Is there a specific tax regime for carried interest in your jurisdiction?
Yes.
2. What is the applicable tax treatment?
Under the German carried interest tax regime, 40% of the carried interest is exempt from income tax in the hands of the carryholder, with the remaining 60% taxed at the individual’s personal income tax rate. The resulting overall tax burden is typically around 28.5%.
3. Under which conditions are the regime applicable?
The fund must qualify, for German tax purposes, as a non‑commercial partnership (vermögensverwaltende Personengesellschaft) whose purpose is limited to the acquisition, holding and disposal of shares in corporations. In addition, investors must have received back the capital they invested before carryholders become entitled to any carried interest.
4. Who are the beneficiaries?
The regime covers individuals who (directly or indirectly) hold an interest in the fund and who promote the fund’s purpose.
5. Which types of funds are concerned?
In practice, the regime primarily applies to private equity and venture capital funds that are structured as non‑commercial partnerships for German tax purposes.
6. Is carried interest subject to social security in your jurisdiction?
No.
7. Any other key information?
If the statutory carry conditions cannot be met, alternative carry structures may be implemented to achieve comparable tax outcomes, but careful structuring is required.
