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Germany: Retroactive changes to RETT rules to apply from 2009



Alexander Linn

Thorsten Braun

On July 17 2015, Germany's Constitutional Court made public a decision, dated June 23, in which the court held that the 'secondary tax base' or 'special tax value' used in the calculation of the value of real property for German real estate transfer tax (RETT) purposes is unconstitutional. The secondary tax base is used as an alternative method of calculating the value of real property in cases where real property is not purchased directly, such as the direct or indirect transfer of shares in real estate holding entities, mergers, and so on. The secondary tax base generally results in values that are far lower than the fair market value of the real property, in many cases only reflecting 50% or less of the fair value of the property. The secondary tax base is calculated based on the actual annual rent or an alternative customary rent combined with certain multipliers and adjustments or, if rent is not available, on tax book values for land and buildings with relevant adjustments.

The court held that the calculation of RETT based on the secondary tax base violates the equality principle in article 3 of the German constitution because it deviates significantly and unintentionally from the market value of the real property. The court decided that the current version of the law cannot apply as from January 1 2009, and that parliament has until June 30 2016 to enact a new law that applies retroactively from January 1 2009.

The change in the law is expected to result in an increased RETT base closer to the fair market value used in direct purchases and, therefore, to an increased RETT in future transactions. Further, due to the retroactive effect of the decision, the new law could apply in cases where the RETT-triggering event already has occurred but the RETT base has not been finally assessed or where the RETT- triggering event has not been indicated or detected.

Alexander Linn ( and Thorsten Braun (


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