The “new” controlled foreign corporation rules in the context of typical fund structures (Part 2)

In the first part of this article, the main features of the “new” attribution taxation, which will apply from 2022, were explained and discussed in the context of tax-transparent private equity funds. In this part, the tension between the additional taxation and the provisions of the German Investment Tax Act (InvStG) is critically assessed, which is particularly evident in the case of fiscally non-transparent private equity funds (e.g. Luxembourg S.A./ SCA or Dutch Coöperatie), as both regulations allow for the taxation of reinvested income and also create an increased compliance burden.