As from 1 January 2010, the Real Estate Transfer Tax Act (RETT) provides an exemption for intragroup restructurings, such as mergers, de-mergers, spin-offs and hive-downs. The exemption only applies to intragroup restructurings that involve a controlling enterprise and one or more controlled companies. A controlled company for these purposes means an entity:
- That was consolidated with at least 95 % of the share capital held directly and/or indirectly by the controlling enterprise for five years before the restructuring (i.e. the holding period requirement); and
- That will remain consolidated with at least 95 % of the share capital held directly and/or indirectly by the same entity for five years following the restructuring (i.e. the retention period requirement).
After the tax authorities issued the first decree on the exception on 1 December 2010, it was questioned whether any enterprise in a multi-level ownership chain above the controlled company could act as the controlling enterprise or whether only the top entity in the 95 % ownership chain could be the controlling enterprise. In a subsequent decree issued on 22 June 2011, the tax authorities have clarified that only the top entity in the 95 % ownership chain can be the controlling entity.
In the December guidance, the tax authorities took the position that the controlling enterprise must be an “entrepreneur” within the meaning of the German VAT Act. This view was expressly upheld in the decree issued on 22 June 2011. Thus, if the top entity in the ownership chain does not qualify as an entrepreneur (e.g. if it is a mere asset holding company), it cannot act as the controlling entity. Presumably, the clarification under the new decree is intended to mean that the controlling enterprise should be the next entrepreneur in the ownership chain. The wording, however, is ambiguous, and it also could be interpreted in such a way that the RETT exemption is not available at all.
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