On July 1, 2021, the “law amending the German law on property transfer rights” entered into force. Legislative reform had previously been the subject of public debate for several years and is still the subject of controversial discussions even after its entry into force. In the meantime, the supreme tax authorities of the German Länder have issued identical decrees on the complex transitional provisions of the changes in the law. We present the most important key points of the legislative reform and the published statements of the tax administration.
The most important innovations resulting from the RETTA reform at a glance
After several years of public debate, the “Law amending the German Law on Land Transfer Rights” of May 12, 2021 entered into force on July 1, 2021. The reform of the law introduced the following innovations relevant to share transactions :
- Previously, a direct or indirect transfer of at least 95% of the stake in a real estate holding company to new shareholders within five years was subject to German real estate transfer tax. Depending on the new legal situation, this depends on whether at least 90% of the interests are transferred to new shareholders within ten years (art. 1 (2a) RETTA).
- It has recently been regulated that a direct or indirect transfer of at least 90% of the shares of a real estate holding company to new shareholders within ten years is also subject to German real estate transfer tax.
(art. 1 (2b) RETTA). Here, it is no longer (no longer) relevant that an individual acquirer exceeds a certain participation threshold (previously 94.9%).
- Under the newly introduced stock market clause (art. 1 (2c) RETTA), certain sales of shares in a company are not taken into account in the context of the two aforementioned taxable events. The prerequisite is that the (transferred) shares are traded on certain stock exchanges or stock exchange systems. The stock market clause also applies in the event of an indirect change in the shareholding structure of a real estate company.
- As in the case of the two aforementioned taxable events, the relevant participation threshold has also been lowered from 95% to 90% in other taxable events (e.g. unification of participations, achievement of a certain economic unification) (Art. 1 (3) and (3a) RETTA).
- In addition, various holding periods linked to the tax exemption provisions
(art. 5 (3); 6 (3); 7 (3) RETTA) have been reduced from five to ten, or even in some cases to fifteen years
(art. 6 (4) n ° 3 RETTA).
- Finally, a new provision has been added stipulating a minimum valuation basis (real estate value to be determined in accordance with German valuation law) in the event of the sale of real estate between legal entities involved in the reorganization process during the period. retroactivity in the event of reorganization. and contributions (art. 8 (2) sentence 1 n ° 4 RETTA).
Complex transitional arrangements
In addition, the complexity of application and the transitional provisions introduced by the reform are remarkable: Thus, the previous versions of the RETTA provisions remain applicable in certain cases. Thus, the legislator intends to prevent, for example, shareholders (or beneficial owners) who already held at least 90% but less than 95% of the stake in the real estate holding company before July 1, 2021 from increasing their stake after June 30, 2021. in a fiscally neutral manner.
Declaration of the German tax authorities on the transitional arrangements
In identical decrees (German: Gleich lautende Erlasse) as of June 29, 2021, the supreme tax authorities of the German Länder have issued a statement on the aforementioned implementing and transitional provisions: various examples are used to explain when shareholders in transactions after June 30, 2021 should be considered as old or new shareholders.
Above all, it is also specified that when applying the new provision on transfers of shares in real estate holding companies (art. 1 (2b) RETTA), only transfers of shares that take place after the 30 June 2021 must be taken into account. The ten-year minimum holding period for sec. 1 (2b) RETTA therefore excludes transfers of shares.