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A recent decision of the German High Tax Court (Bundesfinanzhof, in short BFH)(1) is causing a major uproar among the German private equity houses and is likely to have a substantial impact - far beyond the tax implications for current fund structures - on the future of the German private equity business. From a mere investor perspective the message of the court decision sounds rather positive, as the BFH ruled that any income derived by German tax resident investors in a UK-based private equity fund is exempt from German taxation.
However, German-located private equity structures are adversely affected by the court findings, as their current tax transparency is mainly based on the non-commercial character of their activities, which in turn is key for investors...
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