Practice chapter
By Niko Hatziiosifidis · last reviewed 23 Aug 2026
In Germany, ELTIFs and other semi-liquid private-markets funds held as private assets are as a rule taxed like “normal” investment funds under the German Investment Tax Act (InvStG): flat-rate withholding tax (Abgeltungsteuer) of 25% (plus solidarity surcharge and, where applicable, church tax) on distributions, on the annual advance lump-sum tax (Vorabpauschale) and on the gain when you redeem or sell. Whether you also get a partial tax exemption (Teilfreistellung) — that is, whether part of the income stays tax-free — depends on the individual fund and its fund rules; many private equity and private credit ELTIFs do not meet the equity-fund ratio and therefore have a 0% partial exemption. One exception to the whole system: funds in partnership form, to which the InvStG does not apply at all. This text is general information, not tax advice (as at August 2026).
For tax purposes what matters first is the fund’s legal form, not the “ELTIF” label (ELTIF 2.0 = Regulation (EU) 2023/606). An investment fund within the meaning of § 1 InvStG is in principle any collective investment undertaking under the KAGB, the German Capital Investment Code — open-ended or closed-end, domestic or foreign. The exception that matters most in practice: collective investment undertakings in the legal form of a partnership (or a comparable foreign form) do not fall under the InvStG, by virtue of § 1(3) InvStG; transparent taxation under the general rules applies to them instead — as it does, for instance, to a German closed-end Investment-KG (specialist article at institutionelle-investoren.org). The great majority of ELTIFs distributed to retail investors are, however, domiciled in Luxembourg (151 of 268 ELTIFs at the end of 2025, according to the Scope-ELTIF-Studie 2026), often as a Part II SICAV — a corporate form with its own legal personality, which from a German perspective is regularly treated as an investment fund under the InvStG. The specialist article by Reiff/Zander records the same point: ELTIFs that are not structured as partnerships are subject to the InvStG (DFPA: “Die Besteuerung des ELTIF nach dem Investmentsteuergesetz”).
Where the InvStG applies, you as a retail investor pay tax on three kinds of income as investment income (§ 16 InvStG): distributions, the advance lump-sum tax (Vorabpauschale) and the gain on redeeming or selling the shares (§ 19 InvStG). On these, flat-rate withholding tax (Abgeltungsteuer) of 25% plus a 5.5% solidarity surcharge is payable — 26.375% together — plus church tax where applicable; the savers’ allowance (€1,000, or €2,000 on joint assessment, as at 2026) reduces the bill (BVI FAQ on fund taxation). Alongside that, the fund itself pays 15% corporation tax on certain German-source income (German dividends and property income, for instance) — one reason the partial tax exemption (Teilfreistellung) exists as a flat-rate offset.
The advance lump-sum tax (§ 18 InvStG) is a minimum tax for years in which a fund distributes little or nothing — which, for accumulating semi-liquid funds, is the normal case. The starting point is the base return: redemption price at the start of the year × base rate × 70%. The German Federal Ministry of Finance (BMF) announces the base rate each year: 2.53% as at 2 January 2025 (BMF circular of 10 January 2025), and 3.20% as at 2 January 2026 (BMF circular of 13 January 2026). For 2026, then, the base return is 2.24% of the share value at the start of the year. An example: on a fund holding worth €10,000 on 2 January 2026, that is a base return of €224; without a partial tax exemption the tax on it comes to around €59 (26.375%, excluding church tax and with no exemption order in place).
Three limits matter here: distributions made during the year are deducted; the advance lump-sum tax is capped at the actual increase in value over the year and can never be negative — if the fund loses value or the NAV marks time, no advance lump-sum tax arises, or only a correspondingly small one; and in the year of purchase, one twelfth is deducted for each full month before acquisition (§ 18(2) InvStG). The advance lump sum is deemed to accrue on the first business day of the following year. Note the liquidity effect: you pay tax on income that has not been paid out to you — with a semi-liquid fund whose shares you can redeem only within limits, a point that Reiff/Zander expressly name in their DFPA article as a risk of the new tax system. Advance lump sums already taxed are later deducted from the taxable gain on sale, so to that extent there is no double taxation.
The partial tax exemption (§ 20 InvStG) leaves a flat portion of all income tax-free in the hands of a retail investor — and it applies equally to distributions, the advance lump-sum tax and capital gains: 30% for equity funds, 15% for mixed funds, 60% for property funds and 80% for funds focused on foreign property — and 0% for anything that meets none of these categories. A fund counts as an equity fund only if, under its fund rules, it invests more than 50% of its gross assets in equity participations on an ongoing basis (the well-known “51% ratio”, § 2(6) InvStG); for a mixed fund, at least 25% applies.
This is where the decisive point for private markets lies: equity participations are, at their core, shares in corporations (§ 2(8) InvStG). Loan receivables do not count — so a private credit ELTIF cannot in practice meet the ratio. And interests in partnerships do not count either: in the view of the German tax authorities, even equity participations held through partnerships are left out of account for the partial tax exemption (private-banking-magazin on the BMF application decree). Because classic private equity target funds are almost always partnerships (LP/SCSp structures), typical PE fund-of-funds ELTIFs often come away empty-handed on the ratio — Reiff/Zander point out that funds investing through transparent vehicles or via loans in particular frequently fail to reach the thresholds reliably. The result: many PE and private credit ELTIFs have a 0% partial exemption; whether your fund gets one is set out in its fund rules and is a question for the individual case. There are counter-examples, though — ELTIFs that invest directly and predominantly in corporations (infrastructure companies in corporate form, say, or co-investments) and deliberately write the equity-fund or mixed-fund ratio into their fund rules. In our database of 141 semi-liquid funds we will show the partial-exemption status for each fund wherever it can be evidenced.
If the fund sits in a German custody account, the institution holding it settles everything automatically: it withholds flat-rate withholding tax on distributions, the advance lump-sum tax and gains on sale, and remits it — the tax on the advance lump sum being charged to your account early in the year even though no money has come in (BVI FAQ). If, by contrast, you buy semi-liquid funds through a foreign platform or custodian bank, no German tax is deducted at source — you have to declare the income yourself in your German tax return (Anlage KAP). Distributing share classes generate taxable inflows on an ongoing basis; accumulating ones shift part of the taxation onto the advance lump-sum tax and the sale. Check these specifics before you buy: the fund rules (do they state an equity-fund or mixed-fund ratio? If not, a 0% partial exemption looms), the fund domicile and legal form (SICAV/Sondervermögen versus partnership — the latter means an entirely different tax world, separate-assessment return included) and whether the provider supplies German tax reporting (as at August 2026).
In Austria, fund income held as private assets is subject to capital gains tax (KESt) of 27.5%. What matters is whether the fund is a reporting fund that reports its deemed distributed income to the Österreichische Kontrollbank (OeKB). With a non-reporting fund, flat-rate taxation looms: 90% of the annual increase in value is assessed, but at least 10% of the redemption price at year end — regardless of the actual income (broker-test.at). New private-markets vehicles in particular do not always have reporting-fund status; whether your particular ELTIF reports is something to check before you buy (as at August 2026).
For Swiss private assets, the income components of a fund are subject to income tax — distributed and accumulated alike. Capital gains reported separately by the fund are in principle tax-free for retail investors; in addition, the units are subject to wealth tax at the tax value shown in the price list of the Swiss Federal Tax Administration (ESTV), that is in ICTax (TaxInfo Canton of Bern). For semi-liquid funds it therefore matters whether and how the vehicle is recorded in ICTax, and whether the provider reports income and capital gains cleanly separated — that decides the taxable share (as at August 2026).
The fund rules are the legal source of the partial-exemption status. § 2(6) and (7) InvStG make classification as an equity or mixed fund conditional on the fund investing more than 50%, or at least 25%, of its gross assets in equity participations “on an ongoing basis in accordance with its fund rules”. A high participation share in fact is not enough if the fund rules do not lock the ratio in; conversely, for funds without a contractually fixed ratio the German tax authorities demand evidence (statements of assets, confirmations) that the threshold has been exceeded continuously (private-banking-magazin). In the prospectus or the fund rules of a Luxembourg Part II fund, then, what you look for specifically is a German tax clause (“German tax provisions”, equity participation ratio).
§ 2(8) InvStG in detail: equity participations are exchange-traded shares in corporations, plus interests in unlisted corporations that are subject to income taxation in the EU/EEA (third countries: at least 15%). In fund-of-funds structures, interests in target investment funds count only on a flat-rate basis: equity-fund units at 51% and mixed-fund units at 25% of their value (Deubner). What does not qualify: partnership interests, receivables and loans — and, in the tax authorities’ view, equity participations held indirectly through partnerships as well. That strikes the standard market PE architecture (a Lux SICAV as the ELTIF, with SCSp/LP target funds beneath it) at its heart: economically the investor holds stakes in companies, but for tax purposes often none of it counts towards the ratio.
Pitfalls with Luxembourg structures: an ELTIF set up as an SCS/SCSp (a partnership) falls outside the InvStG — which means transparent taxation with a separate assessment, potentially different categories of income, and none of the convenience of flat-rate withholding tax. Check as well whether the fund supplies German tax reporting (tax bases for the custodian bank); without it, estimated assessments and extra work at the assessment stage loom.
Withholding taxes inside the fund: foreign withholding taxes on dividends and interest arise at fund level and, under the InvStG 2018, can no longer be credited individually by a retail investor; the partial tax exemption is the flat-rate offset for that prior burden (BVI). A fund with a 0% partial exemption therefore carries such prior burdens without any compensation — a frequently overlooked return factor in private-markets funds of funds. The partial exemption also works symmetrically, incidentally: losses, too, are deductible only pro rata (as at August 2026).
In Germany, holdings in private assets are as a rule taxed under the German Investment Tax Act: 25% flat-rate withholding tax (Abgeltungsteuer) plus solidarity surcharge (and church tax where applicable) on distributions, the advance lump-sum tax (Vorabpauschale) and gains on sale. That applies to ELTIFs in fund or corporate form (a Luxembourg SICAV, for example); different rules apply to ELTIFs in partnership form. How much tax actually is payable depends on the individual fund.
Yes — for accumulating ELTIFs under the InvStG it does in principle, but only if the share value has risen over the year. The basis is the BMF base rate (2025: 2.53%; 2026: 3.20%), 70% of it applied to the value at the start of the year, capped at the actual increase in value. If the NAV stagnates or falls, no advance lump-sum tax arises, or only a small one.
That depends on the individual fund. Only where the fund rules provide for an equity participation ratio of more than 50% (equity fund, 30% exemption) or at least 25% (mixed fund, 15%) is there a partial exemption at all. Many private equity fund-of-funds and private credit ELTIFs do not meet that — in which case, 0%.
As a retail investor holding through an ELTIF or an open-ended AIF, mostly under the InvStG as described above — often with no partial exemption, because target-fund interests held through partnerships, and loans, do not count as equity participations. Classic closed-end PE funds in KG form, by contrast, are taxed transparently under the general rules. Which case applies is decided by the structure of the individual fund.
With a German custody account the bank remits the tax automatically, so a declaration is normally not needed (exceptions include special church-tax cases or the Günstigerprüfung, the check of whether your personal rate is lower). With foreign custody accounts or platforms you have to declare distributions, the advance lump-sum tax and gains yourself in the Anlage KAP schedule.
In part: capital gains reported separately are in principle tax-free when held as private assets, but the income components (interest, dividends — accumulated ones included) are subject to income tax, and the units are subject to wealth tax. What governs is how the fund is recorded in the ESTV price list/ICTax — if in doubt, have it checked.
Last reviewed: 23 Aug 2026 · Methodology · Not investment advice.