Under a new provision in RETTA section 6a, the transfer of real estate, as well as events covered by RETTA sections 1(3) (i.e. a unification of shares) and 1(2a) (i.e. a change of partners in a partnership) are exempt from RETT if they are part of a restructuring specified in section 1(1) 1-3 of the Reorganization Act (non-tax legislation dealing with corporate restructuring). The specified restructurings are, in particular, mergers, de-mergers, spin-offs and hive-downs. Intragroup restructurings involving a mere transfer (e.g. a sale), an exchange of shares or a contribution-in-kind will not qualify for the RETT exemption because these transactions are not covered by the Reorganization Act. For these transactions, the old (strict) rules remain applicable.
Restructurings under comparable rules in other EU/EEA Member States will qualify for the RETT exemption provided the requirements -- particularly with respect to the holding periods (see below) -- are met. No relief is provided, however, for intragroup restructurings in non-EU/EEA Member States (e.g. Switzerland and the U.S.).
The exemption will apply only to intragroup restructurings that involve a controlling entity and one or several controlled entities or only several entities controlled by a single controlling entity. A controlled entity for these purposes means an entity that was consolidated with at least 95% of the share capital (directly and/or indirectly) held by the controlling entity within five years before the restructuring and that will remain consolidated with at least 95% (directly and/or indirectly) held by the same entity for five years following the restructuring. Although not specifically stated in the law, the five-year holding period should not apply if the company was not in existence before the restructuring (e.g. in the case of a spin-off) or if the company no longer exists after the restructuring (e.g. in the case of a merger).
Example 1:
GmbH A owns 100% of GmbH B which, in turn, owns 100% of real estate-owning GmbH C. GmbH C is merged into GmbH B. The transfer of real estate via the merger should be RETT exempt provided at least 95% of GmbH C has been held by GmbH B for the previous five years. According to our understanding of the law, it is not a requirement that GmbH A hold GmbH B for five years after the merger.
Example 2:
GmbH A owns 100% of the shares in GmbH B and GmbH C. GmbH B owns 100% of the shares in GmbH D, which owns German real estate and is a 100% limited partner in partnership E, which also owns German real estate. GmbH B is merged into GmbH C. The unification of shares in GmbH D in the hands of GmbH C and the change of partners in partnership E of at least 95% should be RETT exempt provided GmbH B and GmbH C have been at least 95% held by GmbH A for five years before the merger and GmbH C will be held by GmbH A for five years after the merger. According to the new rules, no holding periods should apply for partnership E and GmbH D.
Example 3:
GmbH A owns 100% of the shares in GmbH B and in GmbH C, which owns German real estate. The shares in GmbH C are to be contributed to GmbH B. Until the end of 2009, the restructuring would have triggered RETT due to the consolidation of shares at a new tier (GmbH B) (although this could have been avoided by contributing only 94.9% of the shares, with 5.1% of the shares in GmbH C retained by the current shareholder or acquired by an unrelated party). As from 1 January 2010, it is possible to opt for a spin-off of 100% of the shares in GmbH C from GmbH A to GmbH B; a spin-off is covered by the Reorganization Act and should qualify for the RETT exemption.
