Since the Annual Tax Act (Jahressteuergesetz) has entered into force on 21 December 2022, the legal situation regarding real estate transfer tax (RETT) for companies with real estate located in Germany has become much stricter.
The stricter legal provisions apply equally to the acquisition of shares in real estate owning partnerships as well as corporations if the transaction’s signing (i.e. the obligation to transfer the shares) and the actual transfer of the shares in rem (closing) occur at different times.
In such cases, the tax authorities need to be notified once at signing and another time at closing. in order to avoid RETT becoming payable twice in connection with the same transaction (according to sec. 16 (4a) and (5) GrEStG). The complexity of these notifications should not be underestimated:
The notification period is short (two weeks or one month, respectively). Several persons need to be identified that are jointly responsible for the notifications and the required content of the notifications needs to be entirely provided. Therefore, RETT-relevant transactions should be analyzed at an early stage before signing in case signing and closing occur at different times. In case of acquisitions of real estate owning companies, such analysis may be carried out as part of the tax due diligence procedures and the preparation of the sale and purchase agreement.
In case the notification obligations are not fulfilled in time, or the filing is incomplete, RETT in connection with the relevant acquisition of shares may be triggered twice.
Apart from the proper fulfillment of notification requirements regarding signing and closing, there is currently no other legally secure possibility to annul or amend an additional RETT assessment in connection with the signing of a transaction. Moreover, in case the notification obligations have been neglected, we do not see a regulation to avoid a double RETT-taxation in case of a discrepancy between signing and closing due to the lack of a purchaser identity.
Conclusion
Due to the introduction of sec. 16 (4a) and (5) GrEStG, the RETT-related situation has been tightened for the taxpayers concerned.
When signing and closing occur at different times, it is now obligatory to notify the tax authorities once at signing and once at closing, even if they relate to the identical transaction.
Therefore, real estate acquisitions qualifying as relevant according to the tax authorities must be analyzed at an early stage prior to signing and notification obligations must be identified.
Liliane Kleinert and Peter Klumpp will be happy to provide you with appropriate tax advice. For further information on this topic, please refer to Umwandlungs- und Gestaltungsberatung (M&A Tax and Legal).