Tax accounting for specialised investment funds is an area where technical complexity meets demanding process and resource requirements. Anyone seeking to administer such funds must comply with the extensive requirements of the German Investment Tax Act (InvStG), calculate relevant tax metrics and implement complex processes. This requires not only the appropriate technology, but also specialist expertise and dedicated resources.

Navaxx S.A., headquartered in Luxembourg, faced this very challenge. The company first explored the issue in 2017 in connection with the German Investment Tax Reform Act. At the time, it made a conscious decision not to include the administration of specialised investment funds in its service offering. Implementing the necessary capabilities would have been complex and costly, while being relevant to only a small proportion of its clients. IFTaaS® has fundamentally changed this equation.

From decision to operation

Navaxx’s experience illustrates precisely the type of requirements IFTaaS® – Investment Fund Taxation as a Service – was designed to address. IFTaaS® combines Profidata’s technology platform and digitalised processes with KPMG’s tax expertise. Tax accounting, the calculation of relevant tax metrics and preparing tax assessment declarations pursuant to Section 51 InvStG can all be outsourced, eliminating the need for clients to establish their own infrastructure and resources.

For Navaxx, this was a decisive advantage: rather than building an in-house team and investing in software, the company can access the required services as needed.

“IFTaaS® takes a highly complex topic off our hands while making it scalable, secure and ready to use from day one,” says Joachim Hennen, co-founder of Navaxx.

For Ralf Spöth, a member of the management board at Profidata Services AG, this is precisely where the strength lies: “The company gains access to a new range of services without having to build the entire infrastructure itself – we take care of the complexity as part of our service.” Navaxx simply needs to set up the data transfer; Profidata and KPMG handle the configuration and technical implementation. 

“The implementation was surprisingly straightforward,” says Joachim Hennen. The complex tax processes run in the background, whilst Navaxx can concentrate on its own core business. When asked how much he notices of the underlying technical processes in day-to-day operations, Hennen replies succinctly: “Actually, nothing – and that’s exactly how it should be.”

A single fund can be the starting point

For Ralf Spöth, this simplicity is a key principle behind IFTaaS®, as the service is deliberately designed to make it easy to get started. Even a single specialised investment fund can be handled through the service. As the business grows, the service can be scaled accordingly to accommodate a larger number of funds.

“This is particularly relevant for our clients when participating in tenders,” says Ralf Spöth. “If you cannot support specialised investment funds and the requirements of the German Investment Tax Act, this can quickly become a disadvantage when competing for the overall mandate.” The service is therefore particularly attractive to smaller management companies and international providers looking to enter the German market initially with only a small number of specialised investment funds. IFTaaS® provides access to a service area that would otherwise require significant investment.

For Navaxx, the successful migration of its first multi-investor fund represents more than just another milestone. It broadens the company’s opportunities for winning new business and lays the foundation for supporting even more mandates involving specialised investment funds in the future.

Would you like to learn more about how IFTaaS® can expand your service offering? Speak to our expert Ralf Spöth to find out how you can outsource tax accounting for specialised investment funds efficiently and at scale.