German Real Estate Transfer Tax: Upcoming changes for share deals
According to recent press releases, the German legislator intends to tighten the German Real Estate Transfer Tax (“RETT“) rules for share deals significantly. A draft bill has not been published yet. However, the main changes could be summarized as follows:
- Reduction of the relevant treshold to 90%: The relevant threshold for RETT triggered by the sale and transfer of participations in real estate holding partnerships or corporate entities is likely to be reduced from currently 95% to 90%.
- Extension of observation period to 10 years: The current RETT regime provides for an observation period, applicable to Propcos in the legal form of partnerships. After the end of this observation period, interests can be disposed of without triggering RETT. Such observation period is likely to be extended from currently five to ten years.
- New RETT rule for PropCos in the legal form of corporations: A specific rule that currently only applies to Propcos in the form of partnerships shall be applied also to Propcos in the form of corporate entities. As a result, RETT would be triggered at Propco level if 90% or more of the shares of such Propco are transferred to one or several new shareholders within a period of ten years. A unification of more than 90% in the hands of one shareholder is not necessary.
Please contact your TAXGATE Team in case of any questions.