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

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

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 & shared bottom lb ros

More from across our site

The US president also unveiled a new 50% levy on copper imports; in other news, a UK wealth tax proposal has been criticised by the Institute for Fiscal Studies
Wim Wuyts, who had been head of the specialist tax network since 2017, is moving on to a new role with WTS’s Belgian member firm
MNEs are increasingly using algorithmic tools in TP. Sahasranshu Dash argues that data ethics should therefore plug directly into the TP design process
The Institute of Chartered Accountants in England and Wales also queried whether HMRC resources could be better spent scrutinising larger entities
Grant Thornton’s Austria tax head likens his practice to an escape room, shares his football coaching ambitions, and explains why tax is cool
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 EMEA Tax Awards
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 Asia-Pacific Tax Awards
The fates of pillars one and two hang in the balance after the US successfully threw its weight around in G7 and Canadian negotiations
Rafael Tena tells ITR about the ‘crazy’ Mexican market, ditching the hourly rate, and refusing to grow his fledgling firm in an ‘unstructured way’
It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
Gift this article