Will some investment funds lose their tax advantage?
In December, the Senate submitted to the Chamber of Deputies its own draft amendment to the Income Tax Act designed to narrow the definition of basic investment funds.
Basic investment funds enjoy a tax advantage in form of a reduced corporate income tax rate of 5%. A basic investment fund is understood to be (inter alia, since the definition is much broader) an investment fund pursuant to an act regulating investment companies and investment funds whose shares are accepted for trading in a EU regulated market.
According to the draft amendment, this type of investment fund should be entirely removed from the definition of basic investment funds. The explanatory memorandum to this amendment draws attention to the fact that the current tax advantage is also used by developers, i.e. entities that are not primarily engaged in investing in the financial market. The state thus provides tax advantages to entities without any public interest, thus losing income for the state budget. The senators have therefore submitted this draft amendment to prevent undesirable tax optimisation. It will first be evaluated by the government, then by the deputies. The amendment is proposed to become effective from 1 January 2019.