German Bundesrat Seals Reform of Real Estate Transfer Tax

In its session on 07.05.2021, the German Bundesrat approved the amendment to the Real Estate Transfer Tax Act as of 01.07.2021, which had already been passed by the Bundestag.

According to the new regulation, the acquisition of shares in a real estate company will only be exempt from real estate transfer tax if the acquired share is less than 90 %. Previously, the limit was 95 %. In future, all partnerships and corporations will be covered equally, both with regard to changes in the shareholder structure and in the case of share mergers in one hand.

In addition, the relevant observation period will be extended from five to ten years, so that the tax liability – depending on the federal state, up to 6.5 % of the purchase price – will be triggered if at least 90 % of the shares in a real estate company are transferred within a ten-year period. A five-year holding period that has already expired as of 1 July 2021 and was previously applicable will not be extended by the entry into force of the amendment to the law. The same applies to share transfers in corporations already effectively completed as of 1 July 2021. If, on the other hand, the previously applicable five-year holding period has not yet expired as of 1 July 2021, it will be extended to ten years.

Stock listed companies are spared from the new shareholding limits. According to this so-called “stock exchange clause”, no real estate transfer tax is due even if 90 % or more of the shares are transferred to new shareholders in the course of stock exchange transactions.

The aim of the amendment to the law is to make it more difficult to circumvent the accrual of real estate transfer tax in high-priced real estate transactions by means of a share deal, which is frequently used.