Germany: No real estate transfer tax charge on indirect partial transfer of partnership share
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Germany: No real estate transfer tax charge on indirect partial transfer of partnership share

welbers.jpg

Hartwig Welbers, PwC

Real estate transfer tax (RETT) of between 3.5% and 5.5% of the taxable value of property owned by a partnership is due if at least 95% of the ownership interests in the partnership change over a five-year period. The change can be direct or indirect. On this basis, the tax office raised a RETT assessment on a partnership of two partners after the ultimate holding company of a 6% partner sold 50% of the shares in its interposed direct subsidiary to another direct subsidiary and the remaining 50% to a third party following the transfer of the 94% partnership interest by the other partner to a different third party. The tax office contention was that the effective composition of the property owning partnership had changed by more than 95%, taking all changes together. The Supreme Tax Court in its judgment II R 17/10 of April 24 2013 published on June 19 2013 has now rejected the tax office's contention. Rather, only 94% of the partnership interest had changed hands (the first transaction) and the 6% holding remained unaffected. Direct changes of ownership were a matter of legal form, while indirect changes could only be seen as a matter of business substance. In that respect only a sale of all the shares in an interposed corporation to a new ultimate shareholder enabled him to dispose over the partnership share without reference to the other investor. The 50% sale at issue did not and was not therefore the equivalent of a transfer of a 3% share in the partnership.

Whether this judgment applies to indirect changes in shareholdings in a property-owning corporation is not entirely clear, although such a conclusion would seem logical.

The tax authorities are rumoured to be considering a decree instructing tax offices not to follow this court decision as a precedent in other cases.

Hartwig Welbers (hartwig.welbers@de.pwc.com)

PwC

Tel: +49 711 25034 3165

Website: www.pwc.com

more across site & bottom lb ros

More from across our site

Despite the relief, Brazil’s government has also presented a bill which seeks to re-impose a tax burden on companies’ payroll, one local tax specialist told ITR
Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
Gift this article