Germany Updates Real Estate Transfer Tax Rules – Impact for Stock Transactions | Morrison & Foerster LLP


On April 21, 2021, the German Federal Parliament adopted a new law amending the German Law on Land Transfer Tax (RETT). The new rules will lead to a significant tightening of the taxation of transactions in shares when it comes to real estate located in Germany.

The main changes include the following:

  • Lowering of the participation threshold (from 95% to 90%);
  • Extension of the minimum holding period (from 5 to 10 years; in some cases even to 15 years);
  • Taxation of direct and indirect transfers of at least 90% of the shares of companies owning real estate within 10 years (not applicable to listed companies).

The changes will take effect on July 1, 2021.

Final adoption of the new law is expected in May 2021, and German lawmakers are highly unlikely to add significant last-minute changes to it.

This customer alert provides an overview of the changes and their potential impacts. It applies to all companies and partnerships around the world that own real estate in Germany and are considering a change of ownership, as well as to all investors around the world who wish to acquire German real estate through a share purchase transaction. In addition, the changes are also relevant for all those transactions which were agreed before July 1, 2021 but which will be executed after that date.


In Germany, a direct transfer (“asset deal”) of real estate located in Germany is subject to RETT. The tax rate depends on each federal state and varies between 3.5 and 6.5% of the purchase price.

In certain circumstances, the RETT may also be performed on a share transaction. In the current legal environment, the RETT is triggered during an equity trade if:

  • In five years, 95% of the stake in a partnership that owns real estate in Germany is directly or indirectly transferred to new partners (“Taxation of share transfers” ); Where
  • A related person or group of persons directly or indirectly acquires shares of a company (company or company) owning real estate in Germany, so that this person or group of persons owns at least 95% of the shares of that company (“Taxation of the unification of shares“).

Currently, it is possible to mitigate RETT exposure in equity transactions by setting up certain structures where the aforementioned participation threshold and holding period are not exceeded.

For example, it is common that

  • Only 94.9% of the interest in a partnership is transferred during the five-year holding period. After five years, the seller sells the remaining 5.1%, without triggering the RETT; Where
  • The transfer of shares in a real estate company is split, with the lead investor acquiring 94.9% of the shares and an independent co-investor acquiring the remaining 5.1% of the shares, without triggering the RETT.

With the changes that have now been enacted, the structures previously established to mitigate exposure to RETT will no longer work for future equity transactions. This should be taken into account if shares or interests in a company that owns German real estate are transferred.


As of July 1, 2021, the aforementioned participation threshold will be lowered to 90% and the minimum holding period will be increased to 10 years, or even in certain cases to 15 years. In addition, the rules on the taxation of the transfer of shares will apply not only to partnerships but also to companies.

Consequently, after June 30, 2021:

  • A direct or indirect transfer of at least 90% of the shares of a real estate company within 10 years to new partners or shareholders (whether the company is a joint stock company or a partnership) or
  • Transactions that unify at least 90% of the shares or interests of a company in a person or a group of related persons

will trigger RETT.

Exemptions will apply to the taxation of the transfer of shares of companies listed on a stock exchange of the European Union, of the European Economic Area or on a stock exchange declared equivalent by the European Commission. Special rules will also apply to transfers within a tax group, when the previous participation threshold and holding period remain in force.


The new rules will take effect on July 1, 2021.

The rules also apply to transactions where the signing has already taken place but the closing and transfer of real estate ownership will not be completed until July 1, 2021.

In addition, the previous law continues to apply in all cases not covered by the new law. Shareholders who held at least 90% but less than 95% of shares as of June 30, 2021 will continue to be subject to the old 95% participation threshold, even after the entry into force of the new regulation. It is therefore not possible to benefit from the new regulations by increasing the 92% of shares held on June 30, 2021 to 100% after July 1, 2021.

However, for the new regulation for companies on the taxation of the sale of shares, shares already sold before July 1, 2021 are not to be counted in the 90% threshold.


The new German RETT rules will most likely result in a much longer holding period for changes in the ownership of real estate companies. As of July 1, 2021, only a maximum of 89.9% of the shares or interest can be transferred within 10 years of purchase without incurring any RETT. In some cases of partnerships, even 15 years must have passed.

The reduction structures of the RETT on equity transactions that were built and used in the past will therefore become significantly less attractive in the future.

In addition, every share transaction will need to be carefully considered if the German RETT is unexpectedly triggered by the transfer of shares. In past and current transactions, it will be necessary to check whether the new regulations already apply or whether the holding periods still need to be checked in accordance with the old regulations.

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