The Location Promotion Act (Standortfördergesetz, StoFöG) aims to mobilise private capital, facilitate the financing of young, growth oriented companies and strengthen Germany as a financial centre. Its core mechanism is a coordinated set of amendments to the German Investment Tax Act (Investmentsteuergesetz, InvStG) and the German Capital Investment Code (Kapitalanlagegesetzbuch, KAGB), designed to enable investment funds to invest in infrastructure and renewable energy within a legally secure framework. The Act also contains supplementary amendments to the German Income Tax Act (Einkommensteuergesetz, EStG). The StoFöG was published in the Federal Law Gazette on 9 February 2026 and its key provisions entered into force on 10 February 2026.

German Investment Taxation Act (InvStG) – Pioneering amendments to investment fund taxation

The StoFöG removes key tax obstacles to fund based investments in infrastructure and renewable energy. An investment vehicle can now qualify as an investment fund for tax purposes even if individual assets are actively managed, for example through the operation of renewable energy facilities - thereby materially expanding funds’ ability to pursue operational investment strategies.

In addition, the definition of domestic equity investment income and domestic real estate income is broader at fund level so that such income could be generated indirectly via partnerships. The decisive factor is the classification of the intermediary partnership: where it is asset managing, the income remains privileged; where it is commercial, the income is reclassified as “other domestic income”. As a new statutory constraint, other domestic income (in contrast to domestic equity and real estate income) is no longer potentially eligible for exemptions under sections 8 - 10 InvStG, making correct allocation under section 6 InvStG a key tax mechanism. Safe harbour rules reduce the risk of an “active management” classification at fund level. In addition, the trade tax exemption is extended to investments in renewable energy facilities, infrastructure and public private partnership (PPP) project companies.

The investment rules for special investment funds are also modernised: acquisitions of target funds structured as partnerships, as well as renewable energy, infrastructure and PPP project companies, are facilitated; 100% holdings are permitted; and the 5% limit is relaxed for renewable electricity generation.

Capital Investment Code (KAGB) – Corresponding regulatory relief

The StoFöG introduces, for the first time, a cross sector definition of the “management of renewable energy” that is neutral as to technology and stage of development. Open ended real estate funds (Immobilien Sondervermögen) gain additional options, including: (i) investments in infrastructure project companies (15% quota; a lease is sufficient; no strict building nexus), (ii) expansion of eligible assets to renewable energy assets and charging infrastructure – even without a direct real estate reference, and (iii) operation of renewable energy facilities by the capital management company (Kapitalverwaltungsgesellschaft, KVG), including electricity marketing and feed in to the public grid.

At the same time, the investment scope for open ended special AIFs (Spezial AIF) is expanded to include all target funds, including closed ended funds (e.g. PE/VC/ELTIF).

Income Tax Act (EStG) – Supplementary income tax amendments

By repealing section 3 no. 70 EStG (a REIT related legacy exemption without practical relevance), StoFöG removes an obsolete provision. In addition, the amendment to section 6b(10) EStG facilitates tax neutral reinvestments: the roll over allowance for shares in corporations held as business assets is increased from EUR 500,000 to EUR 2 million. The aim is to keep liquidity in the system and encourage follow on investments—for example after exits in the private equity/venture capital context.

The German version of this article was published in NWB (paywalled).

Read full article in German language in NWB (Paywall)

• Beitrag von Daniel Kai Fischer und Matthias Meinert, NWB 6/2025 S. 356