Abstract:

German domestic investments in alternative asset classes by international investors (Inbound Investments) are subject to a supervisory and regulatory framework that has changed significantly in recent years. Alternative investments are characterized by their specific targets (such as non-listed companies or special properties) and by their pursued investment strategy (hedge funds). Hedge funds, have been especially focused on by the European Union, which passed Directive 2011/61/EU (AIFM-Directive) in July 2011 in order to regulate their intensive use of options and other highly leveraged financial instruments, generally believed to have aggravated the last financial market crisis. Pursuant to this Directive, initiators of hedge funds and other alternative investment funds are subject to a uniform schedule of licensing and operations requirements to market their funds across the European Union (European Passport). Along with this EU-wide regulation, which is expected to facilitate German inbound investments in alternative forms, a tax-efficient structuring of those investments is crucial, especially for real estate transfer taxes and definitive withholding taxes.