Back to home
German Tax and Legal News

Finance ministers of federal states recommend tightening of RETT rules

 Proposed measures could create more complex rules

 On 21 June 2018, the finance ministers of the German federal states announced an initiative to propose changes to the Real Estate Transfer Tax (RETT) code that would significantly tighten the rules. The federal government and the federal states had set up a joint working group in 2016 to examine the possibility of lowering the threshold that triggers the RETT in share deal transactions, along with other measures (see GTLN dated 22 September 2017).

Under current rules, RETT is triggered on direct transfers of real estate and where 95% or more of the shares in a German real estate-owning company are directly or indirectly transferred to a new owner, or where 95% or more of such shares are directly or indirectly combined for the first time in the hands of a new shareholder (or if there is a 95% or greater change either directly or indirectly of the partners in a partnership).

Although a draft law has not been released, the initiative of the federal states focuses on the following measures:

  • Reducing the threshold for (direct/indirect) share transfers to trigger RETT from 95% to 90%. A transitional rule should be introduced to ensure that where shareholders that currently (directly/indirectly) hold between 90% and 95% of the shares in a German real estate-owning entity, any increase in their shareholding would trigger RETT.
  • Introducing a new rule for corporations, whereby a transfer of 90% or more of the shares to several new shareholders within a period of (likely) 10 years triggers RETT (such a rule already applies to real estate-owning partnerships). The federal states intend for changes to the RETT rules to target structures where an outside investor/bank acquires a minority interest or where a seller retains a minority interest to avoid triggering RETT.
  • Extending most of the minimum holding periods for certain structures in the RETT code from five to 10 years.
  • The EUR 25,000 penalty for filing a late RETT return should be increased or abolished.

Changes to the RETT rules are specifically mentioned in the current coalition agreement between the governing parties, so it is likely that some form of the above measures will be approved and possibly could be implemented during 2018. It also is possible that the measures would apply retroactively from the date the first draft law becomes publicly available.

If the above measures are implemented, the RETT rules will become more complex, and it will become more important for potentially affected parties to closely monitor any indirect changes in the ownership chain above German real estate-owning companies. A lower RETT threshold and the changes in the rules for corporations could significantly affect taxpayers that own German real estate in their worldwide group. Thus, corporations that could be affected by the changes should examine both existing structures and ongoing transactions. Along with the uncertainty about the future of the intragroup restructuring exception in the RETT code (which currently is being challenged at the Court of Justice of the European Union regarding its compatibility with EU state aid rules, (see GTLN dated 16 June 2017), the changes could create new hurdles for internal group restructurings of multinational groups.


Andreas Maywald
Client Service Executive | ICE - German Tax Desk
Tel.: +1 212 436 7487 Diese Mandanteninformation enthält ausschließlich allgemeine Informationen, die nicht geeignet sind, den besonderen Umständen eines Einzelfalles gerecht zu werden. Sie hat nicht den Sinn, Grundlage für wirtschaftliche oder sonstige Entscheidungen jedweder Art zu sein. Sie stellt keine Beratung, Auskunft oder ein rechtsverbindliches Angebot dar und ist auch nicht geeignet, eine persönliche Beratung zu ersetzen. Sollte jemand Entscheidungen jedweder Art auf Inhalte dieser Mandanteninformation oder Teile davon stützen, handelt dieser ausschließlich auf eigenes Risiko. Deloitte GmbH übernimmt keinerlei Garantie oder Gewährleistung noch haftet sie in irgendeiner anderen Weise für den Inhalt dieser Mandanteninformation. Aus diesem Grunde empfehlen wir stets, eine persönliche Beratung einzuholen.

This client information exclusively contains general information not suitable for addressing the particular circumstances of any individual case. Its purpose is not to be used as a basis for commercial decisions or decisions of any other kind. This client information does neither constitute any advice nor any legally binding information or offer and shall not be deemed suitable for substituting personal advice under any circumstances. Should you base decisions of any kind on the contents of this client information or extracts therefrom, you act solely at your own risk. Deloitte GmbH will not assume any guarantee nor warranty and will not be liable in any other form for the content of this client information. Therefore, we always recommend to obtain personal advice.