What is partial exemption?
For certain domestic income, there is an additional burden of corporation tax at the fund level for public investment funds. To offset this pre-taxation at the fund level, fund distributions, advance lump sums, and capital gains from the sale of fund units are partially exempt from tax. This is referred to as a "partial exemption".
The rate of the fund-specific partial exemption depends on the type of fund (as of October 2018):
- 30% for equity funds (at least 51% equity according to the investment conditions)
- 15% for mixed funds (at least 25% equity according to the investment conditions)
- 60% for real estate funds (at least 51% in real estate or real estate companies according to the investment conditions)
- 80% for real estate funds with a foreign focus (at least 51% in foreign real estate or foreign real estate companies according to the investment conditions)
The classification of a fund into a fund category is based on the investment policy by the fund company (investment company). They provide the qualification of the fund (e.g. equity or mixed fund).
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The tax certificate from the custodian banks usually states: "Total of all positive capital income, gains and earnings (including distributions, advance lump sums and gains from the sale of investment units after partial exemption)." The individual items are then explained in more detail. Investors should carefully check whether this is also the case with their tax certificate. If the disclosure has not been made: You should request the statement on the equity ratio, real estate ratio, etc. from your fund provider if it has not already been sent to you unsolicited.
These figures are often already published online in the annual reports. Check the relevant ratios of your fund. If, for example, the equity ratio is consistently more than 50%, a partial exemption of 30% should be applied, which must be claimed in the tax return - and not with the fund provider or the custodian bank. Failure to do so may result in paying too much income tax on your capital income.
What is partial exemption?
Which funds are affected by the advance flat rate?
In principle, all domestic and foreign investment funds (including ETFs) can be affected by the advance lump sum.
For distributing funds, any distribution made is taken into account when calculating the advance lump sum. If the distribution is sufficiently high, no advance lump sum is incurred. It can therefore be assumed that the advance lump sum mainly affects accumulating funds.
Which funds are affected by the advance flat rate?
What is the advance lump sum?
The so-called advance lump sum ensures that a certain minimum taxation takes place at the investor level - even in cases where a fund makes no or insufficient distributions. The amount of the advance lump sum always refers to the previous year. When the shares are actually sold, the advance lump sums taxed up to that point are deducted from the proceeds of the sale (proceeds of sale minus acquisition data minus advance lump sum).
This means that a capital gain is reduced (and thus the tax burden). In the case of a capital loss, the advance lump sum already calculated increases your capital loss. Double taxation is therefore excluded.
The advance lump sum has been levied and taxed since the beginning of 2019.
What is the advance lump sum?
