Double assessment of real estate transfer tax on share deals
When it comes to the real estate transfer tax treatment of share deals, both the contractual obligation (known as the signing) and the transfer of ownership of the shares (known as the closing) are important. While, for example, the provision in Section 1 (3) no. 1 of the German Real Estate Transfer Tax Act (GrEStG) refers to the legal transfer of at least 90 % of the shares in companies owning real estate and regularly already covers the contractual obligation as an acquisition transaction, the provision in Section 1 (2b) GrEStG refers to the transfer of at least 90 % of the shares in a real estate-owning corporation to new shareholders. If the signing and closing do not take place at the same time, the tax authorities treat the transaction as two separate real estate transfer tax transactions at different points in time. However, it is highly controversial whether this view is legally tenable.
According to the introductory sentence of Section 1 (3) GrEStG, taxation only applies if taxation under Section 1 (2b) GrEStG does not apply. This restriction should apply to all elements of Section 1 (3) GrEStG, i.e. not only for Section 1 (3) nos. 2 and 4 GrEStG, as the tax authorities argue, but also for Section 1 (3) nos. 1 and 3 GrEStG, which already tax the conclusion of the legal transaction prior to the transfer of the company shares. A time limit cannot be inferred from the priority rule in the introductory sentence of Section 1 (3) GrEStG.
Section 16 GrEStG was expanded by paragraphs 4a and 5 as part of the German Annual Tax Act 2022. Section 16 (4a) GrEStG is intended to prevent, in particular in the case of share deals, a legal transaction from leading to the double assessment of real estate transfer tax – for example, once under Section 1 (3) no. 1 GrEStG and once under Section 1 (2b) GrEStG. In order for a (double) real estate transfer tax assessment to be revoked or amended, both acquisition transactions, i.e., signing and closing, must have been reported in full and in a timely manner (Section 16 (5) sentence 2 GrEStG).
In its decision on suspension of enforcement of July 9, 2025 (case no. II B 13/25), the German Federal Fiscal Court (BFH) had its first opportunity to comment on the interaction between the aforementioned real estate transfer tax regulations.
In the case in dispute, all shares on a real estate-owning limited liability company (GmbH) were acquired by a notarized agreement dated March 11, 2024 (signing). The transfer of the company shares (closing) took place after payment of the purchase price on March 29, 2024. The certifying notary reported the purchase agreement to the tax office on April 4, 2024. No notification of the transfer of the GmbH shares on March 29, 2024, was made. The tax office then assessed real estate transfer tax twice. On the one hand, against the GmbH due to the change in the shareholder structure on March 29, 2024, pursuant to Section 1 (2b) GrEStG, and on the other hand, against the acquirer due to the share consolidation on March 11, 2024, pursuant to Section 1 (3) no. 1 GrEStG. The purchaser lodged an appeal against the real estate transfer tax assessment issued to him and filed an application for suspension of enforcement, which was rejected by both the tax office and the tax court due to the failure to notify the transfer of shares.
In contrast, the BFH, in its summary examination in the preliminary suspension proceedings, found serious doubts as to the legality of the contested real estate transfer tax assessment. This is because the legal situation is uncertain with regard to the question of whether, in the case of an acquisition of shares in a GmbH where the contractual obligation (signing) and the transfer of ownership of the GmbH shares (closing) take place at different times, if the tax office is aware at the time of assessing the real estate transfer tax on the basis of the signing that the transfer of the GmbH shares (closing) has already taken place.
In the explanatory memorandum to the act introducing the provisions applicable to share deals pursuant to Section 16 (4a) and (5) GrEStG, the legislature stated that Section 1 (2b) GrEStG should not take precedence over Section 1 (3) no. 1 GrEStG if the conclusion of the legal transaction and the transfer of shares take place at different times. This is because in such a case, there are two acquisition transactions within the same set of facts. Double taxation with real estate transfer tax is therefore not intended and can be reversed by means of an application pursuant to Section 16 (4a) and (5) GrEStG, subject to the relevant notification requirements. However, the BFH found that this temporal and factual restriction regarding the priority of application of Section 1 (2b) GrEStG over Section 1 (3) no. 1 GrEStG is not expressed in the wording of the law. It is therefore legally doubtful whether and to what extent the provisions of Section 16 (4a) and (5) GrEStG have an effect on the priority of application of Section 1 (2b) GrEStG over Section 1 (3) no. 1 GrEStG.
Notices:
The complexity of the notifications required to avoid double assessment of real estate transfer tax should not be underestimated: the notification period of two weeks or one month is short, several jointly liable persons must be identified, and the notification must contain all the required information. Therefore, real estate transfer tax transactions in situations where signing and closing take place at different times should be analyzed well in advance of signing. We would be happy to assist you in this regard.
In terms of procedural law, cases comparable to the dispute should first be kept open by means of an appeal and, in connection with this, an application for suspension of enforcement should be filed. The application for suspension should probably be granted with reference to the BFH decision of July 9, 2025. However, until a BFH ruling is pending, the tax office, which is bound by the general opinion of the tax authorities, may reject any appeals more or less quickly as unfounded. In this case, separate legal proceedings would have to be initiated. Even if the BFH decision of July 9, 2025 sends a positive signal, the further (individual) course of proceedings remains to be seen.
However, the doubts expressed in the BFH decision of July 9, 2025, as to whether, in addition to the assessment pursuant to Section 1 (2b) GrEStG, real estate transfer tax may also be assessed pursuant to Section 1 (3) no. 1 GrEStG for the signing, does not justify a suspension of enforcement with regard to the assessment of real estate transfer tax pursuant to Section 1 (2b) GrEStG for the closing, according to the BFH in its decision of September 16, 2025 (case no. II B 23/25). This is because, according to its introductory sentence, taxation pursuant to Section 1 (3) GrEStG only applies if taxation pursuant to Section 1 (2b) GrEStG does not apply. In other words, there is a clear priority relationship that is intended to exclude double taxation in certain cases of share acquisition.
