Heuking designs a fund as a closed-end AIF for Kontora for the first time
A team comprised of Dr. Michael Dröge, Dr. Christoph Gringel, and Sven Johannsen, Lawyers at Heuking Kühn Lüer Wojtek, advised Kontora Kapitalverwaltungs GmbH on issues relating to investment law as part of designing a fund in the form of a closed-end AIF. Fabian Gaffron, Lawyer and Tax Advisor at Heuking Kühn Lüer Wojtek, advised on the project from a tax perspective. According to the German Investment Code, launching a closed-end fund as a specialized fund has only been possible since August 2, 2021, as a result of the changes in law introduced by the German Fund Jurisdiction Act. Heuking client Kontora is therefore one of the very first companies to take advantage of this opportunity.
Previously, foundations and ecclesiastical funds were only allowed to generate investment income from commercial operations to a limited extent. Foundations were not allowed to exceed maximum amounts invested in commercial investments and the foundation supervisory authority had the general right to intervene. In addition, commercial investments required extensive administration. With funds in the form of closed-end investment funds, foundations and ecclesiastical funds can now implement their strategic asset allocation without the restrictions that had existed for many years. Closed-end funds are not tax-transparent and are subject to the Investment Tax Act. Investments held through a closed-end fund are not considered economic business operations for foundations, even if the target investments generate income from commercial operations.
The Investment Tax Act provides for relief from corporate income tax liability for funds held exclusively by tax-privileged investors, in particular foundations and ecclesiastical special funds. This ensures that even if the fund is not tax-transparent, the overall tax burden will not be increased by an additional taxation level. Tax-privileged investors are therefore able to transfer their tax advantages to the closed-end fund and, as a result, also allocate income from commercial target investments to their asset management for tax purposes.
Counsel to Kontora Kapitalverwaltungs GmbH
Heuking Kühn Lüer Wojtek:
Dr. Michael Dröge,
Fabian G. Gaffron,
Sven Johannsen (all Hamburg)
Dr. Christoph Gringel (Frankfurt)