Are we finally facing the end of real-estate share deals?
> April 2021

For years, German policymakers have been discussing measures to prevent alleged misuse of tax structures through share deals. On 15 April 2021, the Finance Committee of the Ger-man Bundestag issued a recommendation for a resolution on far-reaching amendments to the Real Estate Transfer Tax Act (Grunderwerbsteuergesetz). These amendments were adopted by the Bundestag on 21 April 2021. If the law also passes the Bundesrat on 07 May 2021, it will enter into force on 01 July 2021.

The Act would lower the shareholding threshold triggering real estate transfer tax from 95% to 90% and increase the holding period from 5 years to 10 years. What would be much more drastic, though, is the implementation of a new Section 1 (2b) into the Act, according to which the transfer of shares in corporations would then also be based on whether shares above the share threshold had been transferred, and not, as is currently the case, only on whether shares had been transferred to one new shareholder. The legal situation for corporations will then correspond to the one which already applies to partnerships. Tax-avoiding constructions will then only be possible in such a manner that a former shareholder would retain an interest of more than 10% in the company for at least 10 years. Transferring 100% of the shares to a new 89.9% shareholder and a new 10.1% shareholder (previously known as the 94/6 model) would then trigger real estate transfer tax.

As a result, share deals will become considerably less attractive under the planned law. That said, the all-clear can be given on two fronts. The new Section 1(2b) is not intended to apply to share transfers that took place before the Act will have come into force. So, the long-feared backlash will not come. In addition, share transfers traded on a recognized stock ex-change are to be disregarded when determining a harmful share acquisition.