Real Estate Transfer Tax in Restructuring Transactions and Company Acquisitions (Part 2)


published on 6 April 2022 | reading time approx. 3 minutes


The amendments to the Real Estate Transfer Tax Act introduced by the so called “Share Deal Reform” of 1 July 2021 have a direct impact on best practices referring to the transfer of shares held in companies that own real estate. In addition to restrictions on taxability (for this see Part 1 of the article, M&A Dialogue Issue 2/22), also other novelties should be taken into account in M&As and restructuring transactions, especially as regards tax liability and notification obligations.


Tax liability

The question of who is liable to pay real estate transfer tax to the tax office depends on the circumstance that triggers the real estate transfer tax obligation (taxable event). Here, the introduction of the new taxable event under Sec. 1 para. 2b of the German Real Estate Transfer Tax Act (RETTA) has brought about a change that has considerable implications for the transfer of shares in companies that own real estate.

(For an optimal display of the table it is recommended to use a desktop PC)
​Category​Sec. 1 RETTA​Entity liable to pay the tax
​“Changed circumstances”para. 2a
para. 2b
​The real estate owning company itself
​“Unification-related circumstances”:para. 3 no. 1 and 2
para. 3a
​The shareholder holding the shares at the time of unification
Special case:
“Transfer of already unified shares”
​para. 3 no. 3 and 4Seller and purchaser as joint and several debtors

The newly introduced changed circumstance under Sec. 1 para. 2b applies when at least 90 per cent of shares in a company owning real estate are transferred to new shareholders within 10 years. It takes precedence over Sec. 1 para. 3 and 3a and, therefore, also applies when, for example, a single purchaser acquires 100 per cent of shares in a limited liability company owning real estate. Previously, the new 100 per cent shareholder was liable to pay the tax in such cases. The special case where the tax office could claim tax also from the seller holding at least 90 per cent of shares was normally regulated by the parties in the share purchase agreement (SPA) concluded between them.


As a result of the precedence of Sec. 1 para. 2b RETTA, a peculiar situation arises that the company owning real estate is liable to pay the tax itself, if a new shareholder acquires at least 90 per cent of its shares. A common practice applied in company acquisition transactions where the parties agree that the purchaser bears the real estate transfer tax is no longer useful in this case; instead, the SPA should include a precise distinction about the economic responsibility of the seller or the purchaser for tax liabilities of the company.


The tax point and notification obligations

The tax point is the date when the taxable event takes place. In asset deals, this is usually the date of signing the purchase agreement (signing), just like in the case of unification-related circumstances. The precedence of Sec. 1 para. 2b RETTA, however, often leads to a situation where, in the case of share transfers, the tax is charged as late as on the transfer in rem (closing). In the case of company acquisitions, this usually does not take place immediately upon conclusion of the SPA, but is subject to conditions precedent, such as payment of the purchase price.


In the case of such a time gap between signing and closing, taxation should actually take place at the time of the transfer of shares, according to Sec. 1 para. 2a or 2b RETTA. However, due to the vague wording of the law, it is currently being debated whether a real estate transfer tax can already arise at the time of signing, according to Sec. 1 para. 3 RETTA. This would be problematic in particular if the transaction failed, i.e. if there was no transfer of shares that could then be taxed in the first place. A taxation of a failed transaction according to Sec. 1 para.3 RETTA could then be eliminated under Sec. 16 RETTA. However, this would require a timely real estate transfer tax notification to the competent tax office, i.e. within two weeks after the taxable event (signing?).


The legislator is currently considering a legal clarification. In the meantime, it has become a common practice to notify the tax office of the transaction within two weeks of the date of signing as a precautionary measure and to point out that final taxation will only be possible once the assignment of shares has been completed.


Moreover, the fact that the transaction could become taxable at the time of signing is also relevant in cases where the company’s real estate is not to be part of the transaction. It should be ensured in such cases that the real estate is allocated to the company for real estate transfer tax purposes already before signing. Otherwise, an obligation to pay the real estate transfer tax could arise also if the real estate no longer belongs to the company at the time of closing.


Tax assessment basis and tax rate

Since, unlike in the classic purchase of real estate, no (explicit) purchase price is agreed for the real estate, a substitute assessment basis (real estate value) is used as the basis for determining the real estate transfer tax in the case of a transfer of shares. The valuation of the real estate is carried out on the basis of special valuation methods in accordance with the provisions of the Valuation Act (investment method, comparison method and cost method). The applicability of the corresponding valuation method depends on the purpose for which the real estate is used. If it is proven in an appraisal that value of the real estate is lower, that value represents the tax assessment basis.

Also in asset deals, the substitute tax assessment basis is applied in exceptional cases, for example if the real estate is transferred free of charge. A purchase price below the market value, on the other hand, is accepted by the tax authorities as long as the sales transaction is not affected by a retroactive transformation concerning the seller and the purchaser – here an asset deal can offer great advantages in the case of intra-group transfers.

The applicable real estate transfer tax rate depends on the federal state in which the real estate is located and currently ranges between 3.5 per cent and 6.5 per cent. (For an overview of the currently applicable real estate transfer tax rates please go to:



The sales of shares and the restructuring of companies that own real estate continue to pose a challenge that should not be ignored, especially after the share deal reform.

We therefore recommend addressing the real estate transfer tax issues in such share deals early on in order to avoid or minimise unwanted real estate transfer tax burdens.  

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