Changes in income taxes resulting from amendment to ICIF Act

The amendment also amends some parts of the consolidation package adopted in the form of amending proposals, reported on here. In this article you will find an overview of the key changes and their impact on income tax pertaining to investment funds.

Corporate income tax payer

Since under the ICIF Act it will now be possible to create sub-funds also within a limited partnership on investment certificates as well as within the newly introduced legal form of a joint stock company with fixed share capital (SICAF), the corporate income tax payer definition is being adjusted accordingly. The taxpayer will generally be any sub-fund of an investment fund; so far, the law only mentioned sub-funds of a joint-stock company with variable share capital (SICAV) as under the current wording of the ICIF Act, it is not possible to create sub-funds for other legal forms of investment funds.

Basic investment fund

In this context, a similar change is being made to the definition of a ‘basic investment fund’, i.e., a fund taxed at a lower, 5% income tax rate. Subject to meeting a 90% asset value test, a sub-fund shall also be a basic investment fund, regardless of the legal form of the investment fund.

Investment fund sub-funds created under the ICIF Act will also be considered basic investment funds if they meet, among other things, the condition of their shares being accepted for trading on a European regulated market. 

Other areas

As taxpayers without a legal personality, sub-funds will now also be treated as depreciators of the tangible assets they comprise. Until now, this possibility was not explicitly mentioned in the law.

The amendment also extends the application scope of provisions that have so far applied only to SICAVs to all sub-funds, or only to SICAF sub-funds where the provision in question only applies to shares.

The provisions of the Income Tax Act applicable to a limited partnership and the limited partner's interest shall apply mutatis mutandis to the sub-funds of a limited partnership on investment certificates.

Effective date and transitional provisions

The effective date of the amendment to the ICIF Act as a whole has been proposed for 1 July 2024. Regarding income tax, transitional provisions propose the following (differing) effective dates:

• To tax obligations for taxable periods commenced before the effective date of the amendment, the Income Tax Act as in effect before that date shall apply. 
• Where the only consequence of the amendment is that a provision newly mentions all sub-funds rather than only SICAV sub-funds, the new wording shall apply from the effective date of the amendment.
• Similarly, the new wording shall apply from the effective date of the amendment also as regards the provision under which rules applicable to a limited partnership and the limited partner's interest shall apply mutatis mutandis to the sub-funds of a limited partnership on investment certificates.

Provisions intended to clarify the tax treatment of valuation differences and the amount of equity of investment funds were not included in the adopted amendment to the Income Tax Act.