Tax rules for (foreign) investment funds

Investment funds generate returns from income (such as dividends or interest) and price gains or losses. Under corporate income tax (Vpb), income is taxed upon receipt, while price gains are only taxed upon realisation (sale). For losses, a foreseeable loss may be taken into account earlier. This system is called valuation at historical cost or lower value.

Exempt Investment Institution (VBI)
A fund with VBI status is valued annually at actual value instead of historical cost. Exchange gains are therefore directly included in Vpb, regardless of whether they have already been realised. The VBI itself is exempt from Vpb and does not have to distribute realised returns to unitholders.

Fiscal Investment Institution (FBI)
An FBI is also exempt from Vpb, but must distribute directly realised returns to unitholders. The fund may be valued at historical cost or lower market value.

Foreign investment funds
Most foreign funds are domiciled in Luxembourg or Ireland and have a tax regime similar to a VBI. They too are valued annually at fair value.

Funds investing in other funds
A fund that invests at least 10% in funds with VBI status or similar foreign funds must be fully valued at fair value, even if it normally has FBI status. As a result, the underlying investments affect the valuation method of the entire fund.

Source: Hanneke Kroonenberg, Van Lanschot Kempen