Property conveyances are subject to a stamp duty (real estate
transfer tax – RETT) of between 3.5% and 5.5% of the
consideration. Substitute transactions are also subject to this
tax, including share transfers leading to the accumulation of
95% or more of a property owning company's shares in a single
hand. A similar rule applies to partnerships, though up to now
there was no rule linking the two.
This led to an avoidance mechanism, known as the RETT
blocker. Provided the acquirer of a company was prepared to
accept at least a very minor degree of minority interest in his
company, he could purchase 94.9% through a wholly-owned company
and the remaining 5.1% through a partnership in which he held a
No RETT was due as neither of the 95% thresholds were met.
However, his effective ownership in the company owning the
property amounted – in this example – to
99.7% (94.9% + 94.9%×5.1%).
On June 7, the Bundesrat put an end to this
avoidance scheme with a provision in an omnibus tax amendment
act combining the two thresholds into one overall effective
ownership level. An effective transfer of 99.7% of the shares
will thus trigger RETT no matter how it is split between
vehicles. However, possibilities for relieving the RETT burden
still exist, so intending investors still need to carefully
consider alternative structures.
On the other hand, though, there is a compensation for those
seeking to reorganise a group structure. The existing
– though limited – exemption for transfers of
shares within a group with no change in ultimate ownership has
been extended to transfers of the property itself, provided
there is no consideration other than shareholder's rights.
There is now one less barrier to corporate reorganisations
Christoph Besch (firstname.lastname@example.org)
Tel: +49 40 6378 1377
Alexander Lehnen (email@example.com)
Tel: +49 40 6378 2136