What are accumulation funds?
Investors have two options for mutual funds: accumulation funds and distribution funds. With accumulation, the income generated – i.e. dividends for an equity fund, interest for a bond fund and rental income for a real estate fund – is not distributed to the investor, but is automatically invested again and again. In the case of distributing funds, on the other hand, there is a distribution at the end of the economic period: Profits are paid out to the shareholders.
Which investment strategies are accumulation funds suitable for?
Good to know: With distributing funds, profits are paid out. In the case of accumulation funds, profits and income are not paid out, but are instead invested in the fund’s assets.
Accumulating funds are particularly suitable for investors with a long investment horizon. Put simply: The accumulation is particularly worthwhile if you want to continuously build up assets over a longer period of time and can do without regularly flowing payments. In order to earn profits from accumulating funds, you must either return or sell your fund units.
By the way, it doesn’t matter whether you pursue an active or passive investment strategy, i.e. whether you opt for actively managed investment funds or whether you favor an investment in index funds or ETFs.
How do you recognize accumulating funds?
Most actively managed funds or passive index funds are accumulating funds in which profits are automatically reinvested.
How are accumulation funds taxed?
For you as an investor, the taxation of fund shares has become fundamentally easier. The new rules stipulate that all funds and ETFs are taxed annually on the basis of a flat rate – even if no income has yet been generated. This so-called advance lump sum was therefore introduced primarily as a tax base for accumulating funds, since profits do not flow to the investor here, but are reinvested in the fund every year. In fact, with the investment tax reform, the tax authorities wanted to prevent investors from being able to postpone the taxation date by years or decades by choosing reinvesting funds. Of course, this also means that the annual partial tax amount to be paid reduces the income that is available for reinvestment.
In return, you as an investor only have to pay taxes on part of your fund income. This “partial exemption” varies depending on the fund’s investment focus: For pure equity funds which, according to their investment conditions, continuously invest at least 51 percent of the fund’s assets in shares, the exemption for private investors is, for example, 30 percent.
How is the advance flat rate calculated?
Good to know: As an investor, you do not have to calculate the advance flat rate yourself; It is determined by the custodian – i.e. your custodian bank.
To calculate the advance flat rate, the redemption price of the fund unit at the beginning of the previous year is multiplied by 70 percent of the base rate that calculates and publishes every year. The fund-specific partial exemption is granted on the calculated base value – with a pure equity fund, 30 percent would be tax-free for you as a private investor. Finally, the amount of the taxable advance lump sum is limited to the increase in value of the fund in the year. If this value is lower than the calculated advance lump sum, the actual increase in value is recognized as taxable income.
How are overseas accumulation funds taxed?
Since the investment tax reform came into force, domestic and foreign funds have been treated equally for tax purposes. Another aim of the legal reform was to rectify the unequal tax treatment. Accordingly, annual withholding tax can now also be paid for foreign accumulating funds if the fund is held in a domestic custody account. The automatic taxation means that you as an investor do not have to regularly state tax income in your tax return.