There should not be tax leakage between the master and feeder fund according to a report published by the European Fund and Asset Management Association and KPMG’s European Investment Management practice.
The 120 page report, Analysis of the tax implications of UCITS IV , states it is important that the conversion of a UCITS into a feeder fund does not have adverse tax consequences for the fund or investors.
Peter de Proft
Under UCITS IV, a feeder fund will be allowed to invest its assets in another fund, a master fund. As it currently stands, certain member states levy withholding taxes on cross-border dividend distributions to foreign feeders, or impose tax on redemptions in the country where the master fund is located.
The report adds: