Brussels, 11/07/2003 (Agence Europe) - The European Commission has decided to send official requests to Germany and Austria to put an end to discriminatory tax treatment of foreign investment funds that makes it more difficult for foreign funds to market their services in these two countries and has also decided to send a formal request for information to France concerning tax allowances that are available on income from shares issued in France but not elsewhere. This request takes the form of a letter of formal notice.
In Germany, under rules on the taxation of dividends introduced in October 2000 and applicable from 2001, corporation tax is no longer charged to shareholders' income tax, but companies and their shareholders are taxed independently.
To compensate for this economic double taxation, the corporate tax rate has been reduced to 25% and only half the amount of dividends distributed to shareholders is taxed. However, in the case of foreign investment funds, the full amount of dividends distributed is taxable. In a press release, the Commission explains that it has been informed that the German Government intends to present new legislation on the taxation of investment funds in general to apply as from January 2004, but no draft legislation has been published to date. “However, the Commission appreciates that the draft legislation presented in autumn 2002, which would have extended the discriminatory taxation of foreign funds to capital gains, has been withdrawn after, inter alia, the Commission expressed its concerns.”
In Austria, tax relief is available for residents but the tax advantages are not available for income from foreign investment funds. The Commission explains in a press release that while “the Austrian government has presented draft legislation to amend the discriminatory provisions; it has not yet been adopted".
In France, la Commission is concerned about legislation granting a tax allowance of EUR 1220 for single people and EUR 2440 for married couples on income from shares issued in France but not those issued elsewhere. The Commission comments that "such discrimination may be in violation of EC Treaty rules on the freedom to provide services (Article 49) and on the free movement of capital (Article 56), as well as the investment funds (UCITS) Directive (85/611/EEC).”