Real estate transfer tax is due on real estate transfers, and with a tax rate of up to 6.5 percent on the assessment base, this is not too low. There should be new regulations soon.
BReal estate transfers are subject to real estate transfer tax, and with a tax rate of up to 6.5 percent on the assessment base (usually the purchase price), this is not too low. In addition to the typical purchase of real estate, purchases of shares in a company that owns real estate are also subject to real estate transfer tax under certain conditions, for example in the event of a merger or transfer of at least 95 percent of the shares (within five years).
The value of the property is then usually decisive. This applies to institutional investors and housing companies as well as private investors who hold large real estate assets in companies. But for critics, the taxation of so-called “share deals” did not go far enough. The legislature now wants to remedy this.
On May 8, the Federal Ministry of Finance (BMF) presented tightening regulations. The relevant participation level is to be reduced from 95 to 90 percent, so that transfers of 90 percent of the shares in real estate companies (both partnerships and corporations) generally trigger real estate transfer tax. In future, a period of ten years should be decisive.
Also the holding periods applicable in certain constellations, violation of which trigger real estate transfer tax. They are to be extended from the previous five years to 10 years (in individual cases even 15 years). According to the draft, the tightening should in principle apply to acquisitions that are realized after December 31, 2019. Transitional regulations are also planned. If, for example, the transaction (“signing”) of the sale of shares takes place within one year before the bill is introduced in the Bundestag and this is implemented within one year after the introduction (“closing”), the new regulations should not yet apply.
For private individuals with significant real estate assets as well as for corporations and medium-sized companies, it is important to adapt to the new regulations. It should be noted, however, that there may still be changes in the further legislative process.
The author is a tax advisor and associate partner at EY.