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Taxation of private equity and venture capital funds

German tax authorities recently agreed on certain rulings concerning the trade tax position of private equity and venture capital funds. Linklaters & Alliance outlines the main areas of agreement in this article.

A very clear conclusion that was drawn, as a result of the discussions, concerned the definition of what constitutes a business as opposed to an asset administration firm. Under the principles discussed, a buy-out firm (but not a venture capital fund) would be subject to trade tax on its investments and German investors would be deemed to receive fully taxable trade and business income.

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