Beware of tax pitfall: uninterrupted fusion of these MSCI-World ETFs awaits unsuspecting investors
Amundi Announces Merger of Two MSCI World ETFs, Tax Implications for German Investors
French asset management giant Amundi has announced the merger of two of its MSCI World ETFs, with significant tax implications for German investors. The merger, scheduled for February 21, 2025, will see the Amundi MSCI World UCITS ETF ACC (WKN: LYX0YD) based in Luxembourg being absorbed into the Amundi MSCI World UCITS ETF ACC (WKN: ETF146) managed in Ireland.
Investors holding shares in the Luxembourg-based fund can sell these up until February 13, 2025. Following this, a trading freeze will be in effect, with shares becoming non-tradable from February 14 until the merger date of February 21.
From a tax perspective, the merger carries implications for German investors. Given that the Irish-managed fund enjoys a more favorable tax treaty with the US, US dividend withholding tax is reduced from the current 30% to 15%.
However, under German tax law, the merger of foreign investment funds can be viewed as a realization event, potentially triggering immediate tax liabilities. For funds recognized as "eligible funds", however, tax neutrality during the merger process can be achieved if certain conditions are met.
If the Irish fund remains eligible as per German law, the exchange of shares from the Luxembourg fund will not be treated as a taxable event for German investors. Instead, the cost basis of the original Luxembourg fund shares will be carried over to the new Irish fund shares.
In addition to the reduced US dividend withholding tax, German investors can expect ongoing capital gains tax on any eventual sale of ETF shares in Germany to remain unchanged, under the standard German tax rate for investment income.
Throughout the merger process (expected to last up to ten banking days), investors may not be able to access their shares for trading or redemption. Post-merger, proper documentation will be essential to maintain the tax history of the investment.
In summary, German investors in the Amundi MSCI World ETF merger in 2025 will enjoy reduced US dividend withholding tax while avoiding immediate tax liabilities, provided the Irish fund continues to meet German eligibility requirements. The main long-term benefit is expected to be improved post-tax returns due to the lower US withholding tax.
The merger of Amundi's MSCI World ETFs in 2025, according to the given text, offers German investors a reduced US dividend withholding tax from 30% to 15%. Additionally, if the Irish fund maintains its eligibility under German law, the exchange of shares from the Luxembourg fund will not be regarded as a taxable event, thereby avoiding immediate tax liabilities for investors.
