All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

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

This week Brazil’s former President Luiz Inacio Lula da Silva came out in support of uniting Brazil’s consumption taxes into one VAT regime, while the US Senate approved a corporate minimum tax rate.
The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
ITR is delighted to reveal all the shortlisted firms, teams, and practitioners for the 2022 Americas Tax Awards – winners to be announced on September 22
‘Care’ is the operative word as HMRC seeks to clamp down on transfer pricing breaches next year.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree