Germany: Real estate transfer tax blocker stopped
International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

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

Germany: Real estate transfer tax blocker stopped

besch.jpg

lehnen.jpg

Christoph Besch


Alexander Lehnen

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 94.9% interest.

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 within Germany.

Christoph Besch (christoph.besch@de.pwc.com)

Tel: +49 40 6378 1377
Alexander Lehnen (alexander.lehnen@de.pwc.com)

Tel: +49 40 6378 2136

PwC

Website: www.pwc.de

more across site & bottom lb ros

More from across our site

The 61-year-old has run the firm’s UK business since 2020
The report, which again demanded PwC release more information related to the scandal, “did not go far enough”, Australian Greens Senator Barbara Pocock told ITR
Resources needed to manage new compliance and financial reporting requirements will be significant, BDO also said
Interested parties may submit their comments on proposed bills and the subsidiary legislation by July 5
The Australian government has run roughshod over professional tax bodies with untested reporting obligations to please a mob baying for PwC’s blood, writes Tom Ravlic
Technical excellence is paramount for clients looking to hire new advisers, according to a survey of nearly 29,000 corporate counsel
The EU nation currently has a headline rate of 25%; in other news, DLA Piper and RSM UK have strengthened their tax teams
Labour's plans for closing the tax gap suggest that taxpayers may face an increasingly aggressive HMRC
Rosenberg, Siemens' New York-based chief tax counsel, tells ITR about Ben Affleck comparisons, welcoming challenges from US tax authorities and what makes tax cool
The settlement means the IRS will receive $200 million from the defunct crypto exchange’s bankruptcy, a fraction of the claim value
Gift this article