Currently it is possible to avoid real estate transfer tax on large real estate investments in Germany by share deals. On July 1, 2021, a law will come into force that does not prohibit this practice, but makes it more difficult.
Real estate transfer tax is payable in Germany when a property changes it´s owners. Up to 6.5 percent of the purchase price, depending on the federal state, must be paid to the tax office. Until now, professional investors have generally been able to avoid paying real estate transfer tax by making share deals. In these deals, it is not the property itself that changes the owners, but shares in a company to which the property has previously been transferred that are sold. Only when a buyer purchases more than a total of 95 percent of the shares does the ownership change, which is why real estate transfer tax could usually be avoided by involving a minority shareholder with more than 5 percent of the shares and a holding period of the shares of 5 years. Share deals will not be prohibited in the future, but will be made more difficult. The state expects to generate tax revenues of possibly billions of euros as a result.
The tax triggering limit for the acquisition of real estate via share deals will be reduced from 95 to 90 percent from July 1, 2021 - when the amendment to the Real Estate Transfer Tax Act is to come into force. The holding period has also been extended: in future, a minority shareholder will have to hold his share for ten years rather than just five. This means that tax will be payable in future if more than 90 percent of the shares in a real estate company change hands within ten years.