Share deal and property acquisition tax reform

Share deals and property acquisition tax reform

After years of negotiations, the Finance Committee of the Bundestag has passed a law that is to prevent tax advantages in the context of share deals in the future.
In the case of share deals, it has so far been possible to avoid land transfer tax, which can amount to up to 6.5 % of the purchase price depending on the federal state, by acquiring real estate through business shares. Instead of selling the property itself (asset deal), a share deal involves selling the shares in the company holding the property.
The amendment of the Real Estate Transfer Tax Act has the effect that real estate transfer tax is now already due from the transfer of shares amounting to 90% of a real estate company within 10 years. Some even demanded a lowering of the threshold for tax liability to 75 %, but in the end an agreement was reached on 90 %. Previously, the tax was only due if 95% of the shares were transferred within five years. Therefore, in the case of share deals, the seller must in future retain an interest of at least 10.1% for at least ten years.
Furthermore, a new property tax item for corporations was also introduced. With regard to the tax-triggering threshold, not only the shares united at the acquirer but all shares moved are now considered. This means that the transaction does not remain below the threshold for tax liability even if the majority share is sold to a majority investor and the minority share to a co-investor. The immediate tax-free acquisition involving a co-investor in corporations is thus no longer possible.
Furthermore, a stock exchange clause is introduced. This is to ensure that the trading of shares on a recognised stock exchange does not incidentally trigger the land transfer tax. The incurrence of the tax is hardly foreseeable and uncontrollable for the buyer. However, the exemption from tax probably does not refer to the case of a complete takeover of file companies via a public takeover offer.
The result of all these changes should be that numerous share deals, which allowed tax savings to a high degree, will no longer be possible in the future. So far, share deals are said to have prevented tax revenues in the billions.
The amendment to the law is to come into force on 01 July. However, the previous regulations, in particular the 95% limit, continue to apply on a subsidiary basis. This is intended to prevent so-called “transitional winners” who, for example, would be able to increase from 94% to 100% tax-free after the amendment to the law comes into force. For corporations, this leads to a perpetual monitoring period with regard to share unions under the old law. Partnerships receive protection of legitimate expectations, provided that the previously applicable 5-year period had already expired.
It remains to be seen whether the amendment of the law will actually put an end to the long-standing discussion on this topic and whether the intended planning security will be achieved. We will of course continue to follow developments on this issue and keep you informed.

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The new broker law

The new brokerage law as of 23.12.2020

With the passing of a new law “on the distribution of brokerage costs in the brokerage of purchase contracts for flats and single-family houses”, the purchase of a property will become more favourable for consumers in the future.
Due to the revised regulations of the brokerage law in the German Civil Code (BGB), the brokerage fee in particular is to be better distributed. The seller of a property has to bear at least half of the brokerage fee himself when hiring an agent who acts for both parties. In other words, the broker can only demand his remuneration from both parties in equal shares. Insofar as he acts for one of the parties free of charge, he may also not demand remuneration from the respective other party. This applies to the sale of single-family houses or owner-occupied flats – consequently not to commercial real estate.
Until now, the costs of an estate agent commissioned by the seller were often passed on to the buyer, so that the buyer regularly incurred high costs. The new law is intended to protect consumers from this and motivate them to buy more real estate by reducing the ancillary costs of purchase. Entrepreneurs are exempt from the regulation; here the brokerage fee can be passed on to the buyer as before. However, it is irrelevant whether the broker is acting commercially. Even if the latter only occasionally acts as a broker, he is affected by the new regulation.
Furthermore, a new formal requirement for brokerage contracts is also envisaged. The text form must now be observed. An e-mail or fax is sufficient for this purpose. Contracts which do not comply with the text form are invalid and have no legal effect.
We will be happy to advise you on this topic and answer any questions you may have.