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Future Structures Avoiding German Real Estate Transfer Tax Could Become Uncertain


In the future it could become more difficult to avoid real estate transfer tax on share deals where German real estate property is involved.

Taxand Germany looks at the structures to avoid German real estate transfer tax (RETT). The tax not only charges asset deals but in many cases share deals, too. With 95% being a crucial figure, the basic rule reads: The tax is triggered when one shareholder acquires shares to hold 95% or more in an entity owning German real estate property. Tax professionals have developed structures allowing a purchaser to acquire significantly more than 95% of the shares without a RETT charge - and in some specific cases with partnerships even 100%.

In an official paper the Bundesrat - the second chamber of the German legislator besides the Bundestag - recently signified a need to tighten RETT law to ensure these structures would not survive. The Bundesrat is concerned by large scale real estate property transactions being made without a RETT charge. No details were published in the paper, and in particular no draft tax bill has been presented yet.

Taxand's Take

It is too early to foresee whether a change will be made to the RETT act and when and what the implications will be to real estate property transactions. However, the first step appears to have been taken to exacerbate RETT avoidance in share deals. Any further developments will be communicated as and when they occur.

Your Taxand contact for further queries is:
Ulrich Siegemund
T. +49 6196 592 16364

Taxand's Take Author