Friday, July 13, 2007

Another Shot in the Foot by the Bundesministerium der Finanzen

The response of the tax bar in Germany to the April 1, 2004, to the imposition of VAT on management fees was to create a work-around known as the "priority profit share." This work around, though artificial, worked and was tolerated by the BMF. On May 31, 2007, however, the BMF ended its tolerance and published an administrative pronouncement on its website declaring that as of June 1, 2008, the priority profit share will be subject to the 19% VAT.

It appears that the BMF has taken a policy decision that venture capital is not an appropriate form of financing for Germany.

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