The reform of the German Real Estate Transfer Tax Act (“RETTA”) in a nutshell

On 1 July 2021, the “Act Amending the German Real Estate Transfer Tax Act” came into force. The legislative reform was previously the subject of public debate for several years and is still the subject of controversial discussion even after it has come into force. In the meantime, the supreme tax authorities of the German federal states have published identical decrees on the complex transitional provisions of the amendments to the law. We present the most important key points of the legislative reform and the published statements of the tax authorities.

The most important innovations resulting from the RETTA reform in a nutshell 

After several years of public debate, the “Act Amending the German Real Estate Transfer Tax Act” of 12 May 2021 came into force on 1 July 2021. The reform of the law has introduced the following innovations with relevance for share deals:

  • Previously, a direct or indirect transfer of at least 95% of the partnership interest in a real estate holding partnership to new shareholders within a five-year period was subject to German real estate transfer tax. According to the new legal situation, it depends on whether at least 90% of the interest are transferred to new shareholders within ten years (sec. 1(2a) RETTA). 
  • It was newly regulated that a direct or indirect transfer of at least 90% of the shares in a real estate holding corporation to new shareholders within ten years is also subject to German real estate transfer tax
    (sec. 1(2b) RETTA). Here, it is not (any longer) relevant whether an individual acquirer exceeds a certain participation threshold (previously 94.9%). 
  • Pursuant to the newly introduced stock exchange clause (sec. 1(2c) RETTA), certain transfers of shares in a corporation are not taken into account within the scope of the two above-mentioned taxable events. The prerequisite is that the (transferred) shares are traded on certain stock exchanges or stock exchange systems. The stock exchange clause also applies in the event of an indirect change in the shareholder structure of a real estate holding partnership. 
  • As in the case of the two above-mentioned taxable events, the relevant participation threshold has also been lowered from 95% to 90% in the other taxable events (e.g. unification of shareholdings, achievement of a certain economic unification) (sec. 1(3) and (3a) RETTA). 
  • In addition, various holding periods in connection with tax exemption provisions
    (sec. 5(3); 6(3); 7(3) RETTA) have been increased from five to ten, in some cases even to fifteen years
    (sec. 6(4) no. 3 RETTA). 
  • Finally, a new provision has been added stipulating a minimum assessment basis (real estate value to be determined in accordance with German valuation law) if real estate is sold between the legal entities involved in the reorganization process during the retroactive period in the case of reorganizations and contributions (sec. 8(2) sentence 1 no. 4 RETTA).

Complex transitional provisions

Additionally, the complex application and transitional provisions introduced by the reform are remarkable: Accordingly, the previous versions of the RETTA provisions remain applicable in certain cases. In this way, the legislator intends to prevent, for example, shareholders (or beneficial owners) who already held at least 90% but less than 95% of the shareholding in the real estate holding company before 1 July 2021 from increasing their shareholding after 30 June 2021 in a tax-neutral manner.

Statement of the German fiscal authorities on the transitional provisions

In identical decrees (German: Gleich lautende Erlasse) dated 29 June 2021, the supreme tax authorities of the German federal states published a statement on the aforementioned application and transitional provisions: various examples are used to explain when shareholders in transactions after 30 June 2021 are to be regarded as old or new shareholders. 
Above all, it is also clarified that when applying the new provision on share transfers in real estate holding corporations (sec. 1(2b) RETTA), only share transfers that take place after 30 June 2021 are to be taken into account. The ten-year minimum holding period of sec. 1(2b) RETTA thus excludes share transfers. 

Next Steps

If you have any further questions about the impact of the law reform, specific questions about your existing structures or upcoming transactions, the Hogan Lovells tax team will be happy to assist you. Please do not hesitate to contact us.



Authored by Marius Plum und Ingmar Dörr


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