August 18, 2006

Hedge Funds and Tax Rates

The taxmen are knocking on the doors of hedge funds; with new investment strategies playing the role of nectar, the tax authorities are the bees being drawn to the hedge fund hives.

There are no fixed standard tax policies regarding hedge funds under European jurisdiction and this makes it difficult for funds to establish taxable presences in the continent, according to Debbie Payne, hedge fund senior manager at PricewaterhouseCoopers (PwC). Hedge funds are thus unable to expand distribution activities across Europe.

Funds are tax transparent in Austria, the Netherlands and France, tax exempt in Germany, Denmark and Ireland, and taxed on income at 20 percent if they are authorized in the UK. Unauthorized funds are taxed at 22 percent. Funds in the Netherlands may be subject to a special tax rule of zero percent income tax and those in Denmark are subject to a final withholding of tax on 15 percent on dividends received on shares in Danish companies. 

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August 18, 2006 in Regulation | Permalink




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