Special Newsletter Tax: Reform of the German real estate transfer tax

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We would like to keep you up to date on the planned reform of the German real estate transfer tax and briefly inform you about the draft bill for an Annual Tax Act 2019 (JStG 2019) published yesterday by the Federal Ministry of Finance.

The draft bill for the Annual Tax Act 2019 with the official designation “Act on the Further Tax Promotion of Electric Mobility and on the Amendment of Further Tax Regulations” contains various relevant amendments, in particular the reform of the real estate transfer tax treatment of share deals.

The main amendments of the draft bill correspond to the draft adopted by the Conference of Finance Ministers at the end of 2018.

The key points can be summarized as follows:

  • Reduction of the threshold for the change of economic/legal own-ership from 95% to 90% in case of entities.
  • Extension of the existing (retention) period under Section 1 (2a) GrEStG (Grunderwerbssteuergesetz – German real estate transfer tax act) from five to ten years for partnerships.
  • Introduction of a new supplementary provision which is similar to the provision already existing for partnerships (Section 1 (2a) GrEStG) making changes of the shareholders in real estate own-ing corporations subject to real estate transfer tax (Section 1 (2b) GrEStG-E).
  • Extension of the retention periods in Sections 5 and 6 GrEStG from 5 to 10 or 15 years respectively.

In principle, the newly proposed provisions are to be applied for the first time to acquisitions realized after 31 December 2019 (Section 23 (17) GrEStG-E). In addition, the draft contains a number of transitional provisions.

It is noteworthy in a positive sense that Section 1 (2b) GrEStG-E shall not be applied to share deals which are based on a contractual obligation entered into (generally signing date) prior  to the date on which the draft law is submitted to the German parliament (Bundestag) (“effective date ” – still open; an update will follow as soon as the date is fixed) if the contractual obligation was created within one year before the effective date and is finalized within one year after the effective date.

However, it remains to be seen, whether the planned transitional and implementation regulations will remain in the draft bill during the further legislative procedure.

Please do not hesitate to contact us if you have any questions.

Yours

CHRISTIAN WEGENER
Tax advisor
Partner
Tel. +49 211 13069-226
Fax +49 211 13069-099
christian.wegener@arqis.com
ARQIS Rechtsanwälte
Partnerschaftsgesellschaft mbB
Hammer Str. 19
40219 Düsseldorf


MAURITZ VON EINEM
Attorney-at-law, Tax advisor
Managing Associate
Tel. +49 89 309055-600
Fax +49 89 309055-699
mauritz.voneinem@arqis.com
ARQIS Rechtsanwälte
Partnerschaftsgesellschaft mbB
Prinzregentenplatz 7
81675 Munic


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