The German Federal Ministry of Finance ("Bundesministerium für Finanzen", BMF) has published a proposal for discussion to amend the Real Estate Transfer Tax Act ("Grunderwerbsteuergesetz", GrStGNG). The draft law is intended to fully revise the regulations on the taxation of share deals and to react to consequential effects from the entry into force of the Act to Modernise the Law on Partnerships ("Gesetz zur Modernisierung des Personengesellschaftsrechts", MoPeG) on 1 January 2024. In addition, an opening clause is to be introduced for the federal states to promote the acquisition of owner-occupied residential property.
Changes in the taxation of share deals
The previous regulations ("Ersatzrealisationstatbestände" - "substitute realization items") on the taxation of share deals are to be completely lifted by the GrEStNG and replaced by a new concept. Rather than the previous taxation of the acquisition of at least 90% of the shares in a real estate company, under the discussion draft only share acquisitions in a real estate company are to be taxed in the event of a merger of the entirety of the shares (100%). The taxation shall be irrespective of the legal form of the real estate company. In order to avoid tax structuring, the discussion draft provides for the definition of a group of acquirers and a person with a beneficial interest.
A group of acquirers ("Erwerbergruppe") is assumed if the acquirers have coordinated their acquisitions with each other. Such a group of acquirers may also consist of third parties.
In addition to the group of acquirers, the GrEStNG introduces the definition of a "person with a beneficial interest". If a person or group of acquirers does not acquire the entirety of the shares in a real estate company, the acquisition is nevertheless subject to real estate transfer tax if a third party holds the remaining shares in the acquirer's beneficial interest in order to avoid real estate transfer tax. A beneficial interest may exist, for example, if the acquirer acquires the majority of the shares and the remaining shareholders are restricted in their shareholder rights.
Changes due to the modernisation of partnership law
The previous tax relief provisions of §§ 5, 6 and 6a GrEStG shall be replaced by a tax relief provision that is neutral in terms of legal form. Pursuant to this provision, an acquisition transaction is to be exempt from tax if the determining influence of an acquirer/group of acquirers over a property does not change as a result of this acquisition transaction.
Further changes
Furthermore, a personal liability of the real estate company shall be introduced if the tax debtors (acquirer/group of acquirers) do not report the acquisition transaction in due time and in its entirety. In addition, there is to be a liability in rem of the real property of the real property company.
The deadline for the notification of the acquisition transaction will be extended to one month.
Notice:
The proposal for discussion at hand already indicates the likely direction of the reform of the real estate transfer tax. Nevertheless, there are still some open questions to be clarified and the political majorities for such an amending bill still need to be found. The legislative process thus remains exciting, but it is imperative to keep an eye on it. The possible reform should at least be included in the considerations when drafting upcoming legislation.
Liliane Kleinert and Heino Tunnat from the BDO Industry Expertise Center Real Estate will be pleased to provide you with tax advice.