Fund establishment costs: Muenster tax court confirms retroactive application of Section 6e EStG

The tax treatment of so-called fund establishment costs is a perennial issue in the context of tax audits of private equity funds. The law even provides for retroactive application of the provision. However, the scope of the costs to be capitalized is unclear in view of the vague wording. In its ruling dated January 24, 2024, the Muenster tax court decided that retroactive application may be constitutional and defined the term “fund establishment costs” very broadly. Raphael Baumgartner explains in his article why the tax court ruled in this way and what risks the ruling poses for private equity and venture capital funds.