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German Real Estate Transfer Tax – Notification of a unification of shares

Real estate transfer tax (RETT) is payable not just on property acquisitions. It can also arise if, for example, as a result of a unification of shares [Anteilsvereinigung] a shareholder ends up holding more than 95% of the shares (90% since 1.7.2021) in a company. The Münster tax court had to clarify how the local tax office would be informed of a unification of shares and what should be taken into account.

In the case that the Münster tax court decided, on 19.5.2022 (case reference: 8 K 2516/20 GrE), the legal action had been brought by a GmbH [private limited company] that, as the main shareholder, held a 94.73% stake in the property-owning X-GmbH. In 2010, X-GmbH acquired shares in itself so that the shareholding of the GmbH that was the claimant increased to 95.26%. Subsequently, a notary sent the local tax office a certified copy and a simple copy of the purchase and transfer agreement. Here, the simple copy was supposed to be treated as a notification in accordance with the Real Estate Transfer Tax Act and forwarded to the RETT office. However, the copy was not forwarded. In 2016, the claimant reported the purchase and transfer transaction and, in 2017, following a tax audit, a RETT assessment notice was issued. The claimant appealed against the tax assessment and argued that, first of all, the statute of limitations on tax assessments had expired because the notary had provided notification of the acquisition transaction in 2010 already. Secondly, no unification of shares had occurred because there had been no changes to the legal arrangements. The purchase of its own shares by X-GmbH had not resulted in any changes with respect to the possibility to influence, the ability to control nor the opportunity to assert authority.

The case before the tax court was unsuccessful (please note that the judgement was issued for the old legal situation; as of 1.7.2021, the shareholding threshold level was lowered from 95% down to 90%). A legal transaction that is subject to RETT becomes liable for RETT if at least 95% of the shares of the company are unified in the hands of the buyer. For the calculation of the proportion of shares, own company shares that are held by a corporation as a property-owning company or intermediate company are however not taken into account. Therefore, in the case in question, a unification of shares had occurred because the claimant’s shareholding had increased to more than 95%. The claimant’s argument that it was previously already a majority shareholder would not result in any other outcome. The crucial factor was that the claimant’s shares that had been part of the assets of X-GmbH had initially been donated. Moreover, the statute of limitations on tax assessments had not yet expired. 

Please note: Furthermore, the Münster-based tax court judges concluded that the requirements for proper notification by the notary, which are clearly stipulated in the legislation, had not been complied with here. The notary had admittedly attached a copy of the purchase agreement for the RETT office. However, in view of the fact that information was missing there, this copy did not constitute adequate notification in terms of its contents.

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