Real estate transactions between partners and partnerships not RETT privileged from 2024

As of January 1, 2024, the German Act on the Modernization of the Law on Partnerships will largely abolish the entitlement of joint ownerships. In the existing German tax system, however, this is the justification for the different treatment of partnerships and corporations, particularly in the area of the preferential treatment for real estate transfer tax under sections 5 and 6 of the German Real Estate Transfer Tax Act (GrEStG). These regulations correct the consequences to be drawn from the independent legal entity status of joint ownerships. This is because, in principle, a transfer of real estate to or from a joint ownership is subject to real estate transfer tax without restriction, even if the transferor or transferee has an interest in the joint ownership.

In practice, therefore, many arrangements benefit from the above-mentioned tax advantages; in particular, the following cases are currently subject to preferential real estate transfer tax treatment:

  • Withdrawal of business real estate before disposal of partnership interests,
  • Transfer of real estate to affiliated partnerships, or
  • Contribution of real estate to partnerships.

Against the background of the new regulations in the area of partnership law due to come into force on January 1, 2024, the government draft bill published on August 30, 2023 for an Act to Strengthen Growth Opportunities, Investment and Innovation as well as Tax Simplification and Tax Fairness (Growth Opportunities Act) contributes to legal certainty at least in one aspect. According to this, the extensive abolition of joint ownership as of January 1, 2024, for transfers already realized and up to December 31, 2023, does not lead to a violation of retention periods that also run beyond December 31, 2023, which are contained, among other things, in sections 5 and 6 GrEStG as a prerequisite for claiming the tax benefits. These deadlines therefore continue to apply, and from January 1, 2024 onwards are only to be applied subject to the requirement that the company assets within the meaning of the Act on the Modernization of the Law on Partnerships take the place of the assets of the joint ownership.

However, the government draft bill on the Growth Opportunities Act does not position itself any further for transfers realized from January 1, 2024 onwards. The previous real estate transfer tax benefits under sections 5 and 6 GrEStG will therefore come to nothing in the future due to the lack of joint ownership assets; transfers of real estate between partners and partnerships, such as in the constellations described above, will no longer be possible subject to preferential treatment in terms of real estate transfer tax according to the current status.

Current debates on a discussion draft bill to amend the Real Estate Transfer Tax Act have not yet been concluded. Among other things, it has been proposed to replace sections 5 and 6 GrEStG with a tax benefit provision that is neutral in terms of legal form and applies equally to partnerships and corporations.


The form of the preferential tax treatment under sections 5 and 6 GrEStG is currently more than uncertain for property transfers between partners and partnerships from January 1, 2024. To be on the safe side, it is advisable to carry out a planned transfer in the current year 2023.