Reed Smith Client Alerts

On 22 April 2021, the German Federal Parliament passed the Fund Location Act (Fondsstandortgesetz, hereafter FoStoG). The FoStoG aims to make the German regulatory framework for supervisory law and tax law more competitive and to implement conditions for the further digitalisation of supervision. Furthermore, the FoStoG aims to implement certain European regulations (adopted in the framework of the European Commission's Sustainable Finance Action Plan) on cross-border fund distribution, taxonomy and ESG information requirements for capital management companies.

Significant changes

The FoStoG amends numerous German laws, in particular, the German Investment Code (Kapitalanlagengesetzbuch, hereafter KAGB) and various tax laws (Investmentsteuergesetz (InvStG), Einkommensteuergesetz (EStG) and Umsatzsteuergesetz (UStG)). This client alert focuses on the essential regulations for capital management companies and their funds, as well as regulations concerning start-ups and SMEs. In terms of content, the FoStoG provides for the following changes:

  • Introduction of new fund types – infrastructure funds and development promotion funds

In the case of public funds, the new infrastructure special fund (Infrastruktur-Sondervermögen) will be introduced. Closed-ended public alternative investment funds (AIFs) may invest in infrastructure project companies. In addition, exemptions from the consolidation obligation under accounting law will be included for closed-ended special funds that are issued as special AIFs. However, there will be no steering of private capital into infrastructure and sustainability investments.

The development promotion fund (Entwicklungsförderungsfonds) will also be introduced as a new special fund type. It will serve to promote sustainability and offer the possibility of investing in emerging markets with a special fund vehicle.