(Material) changes to the German real estate transfer tax as of 01 January 2025

Background: Modernisation of partnership law

Transfers of domestic real estate between a partnership and its partners are generally exempt from real estate transfer tax if the conditions in Sections 5 and 6 of the Real Estate Transfer Tax Act (GrEStG) are met. To secure the tax exemption, it is important that the partners’ share in the joint ownership is not reduced and that certain deadlines are met.

However, the Act on the Modernisation of Partnership Law (MoPeG), effective 01 January 2024, changed these principles. Since then, partnerships have only their “own” assets. Therefore, as of 01 January 2024, there has been a risk that partnerships and their shareholders would no longer benefit from the real estate transfer tax exemption.

Section 23(27) of the Real Estate Transfer Tax Act now stipulates that no “automatic violation” will occur upon the expiration of 31 December 2026. However, the deadlines set in motion by 31 December 2026, will continue regardless of the repeal of Section 24 of the Real Estate Transfer Tax Act. However, this raises the question of whether an “automatic violation” of the retention periods will occur when Section 24 of the GrEStG expires (which, according to current regulations, will be on 01 January 2027). The consequences for transactions not completed by 31 December 2026, are unclear.

A further statutory provision is introduced by the insertion of a new Section 1(4a) in the GrEStG. The Real Estate Transfer Tax Act currently lacks provisions clarifying when a property is attributable to a company for real estate transfer tax purposes. A property belongs to the company that last performed a basic transaction, as defined in Section 1 Par. 1 of the GrEStG, through purchase, unless this is reversed.

Significance for practice 

According to Section 1 Par. 4a of the GrEStG, a property can be attributed to both the purchasing company and the company with the right of disposal. However, this contradicts the Federal Fiscal Court (BFH) ruling, which gives priority to the right of disposal in trust structures. While the risk of double attribution and double taxation is lower, it is not eliminated. The new regulation simplifies the structuring of share transfers, particularly in complex group structures. Once JStG 2024 takes effect, it will no longer be necessary to verify fictitious real estate attribution for group members holding at least 90% of shares in companies owning real estate.

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Philip Goll is a Partner at Pfeiffer Link PartG mbB Steuerberatungsgesellschaft. He is a German tax advisor and public auditor. He specialises in international taxation, corporate restructuring, and real estate transfer taxation. He lectures on the latter at his former university.