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– Current news

Land transfer tax – higher hurdles for share deals

On June 21, the Finance Minister Conference (Finanzministerkonferenz) has made a decision to implement further hurdles for land transfer tax-neutral transfers of property in share deals (transfer of shares to a stock corporation or private company). In doing so, the state finance ministers have in particular agreed on the following measures:

  • Reduction of the 95 %-limit to 90 %

The relevant investment sum is to be reduced from a minimum of 95 % to a minimum of 90 % of shares. The basis for measurement for the land transfer tax remains the entire property value.

Accordingly, in future a maximum of 89.9 % instead of the previous 94.9 % can be procured without incurring land transfer tax.

  • Extension of deadlines from 5 to 10 or 15 years

The current five-year deadlines laid down in the regulations of the German Land Transfer Tax Act are to be extended to ten years (share transfer) or fifteen years (share consolidation).

In future, a maximum of 89.9 % of the shares can be moved in a land transfer tax-neutral manner within 10 years.

Furthermore, the deadline for a land transfer tax-neutral share consolidation has been significantly increased. Up until now, private companies could transfer 94.9% of shares in a land transfer tax-neutral manner as an initial step, and the remaining 5.1% could then be acquired by the new majority shareholder after the expiry of a holding period of 5 years. In case of an extension of the holding deadline, the new majority shareholder will have to wait at least 15 years after the acquisition of the 89.9 % until they can acquire the remaining 10.1 %.

In future, the seller will have to remain significantly longer with 10.1 % within the structure than has been the case up to now.

  • Creation of a new additional statement of facts for stock corporations

Whilst for land-owning stock corporations, a purchaser was up until now only subjected to land transfer tax with a consolidation of at least 95% of the shares, and therefore the acquisition was possible at any time through two independent investors, for private companies the movement of a minimum 95% of the shares within 5 years is also subject to land transfer tax acc. § 1 Para. 2a GrEStG (German Land Transfer Tax Act).

An appropriate statement of facts is to be extended to cover share owner changes in property-owning stock corporations. The seller will therefore also have to remain in the structure for the sale by property-owning stock corporations. An acquisition of all shares by two independent investors is therefore no longer possible.

Currently, it is still unclear as to what extent this stipulation should apply to the regulations for private companies, because at the moment a significant difference between the transfer of shares to a private company and the transfer of shares to a stock corporation is that the assignment is made on conclusion of the purchase contract for a stock corporation, but for private companies it is made on actual transfer of the shares (which often occurs months later).

The exact formulation of the planned regulation does not yet exist. Further developments must be carefully observed for corresponding share deals for which the sale contract has been signed but the share transfer is still outstanding.

In the next step, the federal and state finance ministries are to formulate corresponding legislative texts, which are then to be integrated into the legislative procedure. An exact schedule is not currently known.