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It’s coming after all: German real estate transfer tax reform on so called “share deals” adopted today

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Image of Gottfried Breuninger
Dr Gottfried Breuninger

Partner, German Head of Tax

Munich

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Ehret Michael
Dr Michael Ehret

Partner

Frankfurt am Main

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Mueller Magnus
Dr Magnus Müller

Partner

Munich

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Weber Heike
Dr Heike Weber

Partner

Frankfurt am Main

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Habermayr Christina
Christina Habermayr

Counsel

Munich

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Schade Dirk
Dr Dirk Schade

Counsel

Munich

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Spranger Tim
Tim Spranger

Counsel

Frankfurt am Main

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07 May 2021

After much back and forth, the legislature (with the approval of the German Federal Council today) decided on the real estate transfer tax reform with effect from 1 July 2021.

With today's consent of the German Federal Council, the German real estate transfer tax (RETT) reform was passed with effect as of 1 July 2021. This will have a major impact on the transaction and structuring practice in the real estate sector. In addition to the decrease of the RETT relevant threshold from 95% to 90% and the increase of the RETT relevant observation periods from 5 years to (mainly) 10 years, the central point is primarily the introduction of a "transfer rule" also for real estate holding corporations. Under this rule, a 100% sale by a real estate holding corporation will in future, irrespective of the number of purchasers, be generally subject to RETT. Also for the banking sector, the RETT reform will lead to increased due diligence requirements for project financing and potential tax implications in an enforcement scenario.

In order to avoid RETT risks for companies of the relevant holding structure listed on a stock exchange, a "listing exemption" was fortunately introduced.

Read all about the background to the decision, the planned new regulations, the application regulations and an outlook in our Client Alert.

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