Increase in real estate transfer tax in the context of share deals

The Budget Accompanying Act 2025 introduced a far-reaching reform of the Real Estate Transfer Tax Act (GrEStG), which primarily affects real estate transactions in the form of share deals. Below we provide an overview of the main changes.

Lowering the participation threshold and increasing the deadline

Previously, the provision of Section 1 (2a) GrEStG only applied to partnerships: if their assets included a domestic property, GrESt was payable on a change in the shareholder structure if at least 95% of the shares in the company's assets were transferred to new shareholders within five years. As a result of the reform, this regulation on the fulfillment of the taxable event in the event of a (successive) change of shareholders was also extended to corporations. The deadline was also extended from 5 extended to 7 years .

In addition, the Participation threshold to fulfill the taxable event as a result of a change of shareholder or a merger of 95% of the shares reduced to 75%. With a shareholding of 75%, the legislator assumes that the majority shareholder has a controlling influence, which is now decisive for the fulfillment of the taxable event. This is intended to prevent avoidance structures by retaining dwarf shares.

Another change is that the definition of a share combination or transfer is based on the "acquirer" or "acquiring group" (instead of the previous tax group). The new term "acquirer group" corresponds to the definition of a group under company law. This also includes persons who exercise uniform management or a controlling influence over the company.

Effect on tax rate and tax base for real estate companies

A new legal definition describes real estate companies as companies whose focus is on the sale, rental, or management of real estate. The real estate transfer tax rate for share mergers, changes in shareholders, or reorganizations of real estate-owning companies was previously 0.5%. The property value was used as the basis for assessment. Companies that fall under the definition of real estate companies must now accept an increase in the tax rate to 3.5%. In determining the basis for assessment, the fair market value of the property must also be taken into account. However, share mergers or transfers and reorganizations in which only persons within the family circle within the meaning of Section 26a (1) (1) of the Court Fees Act are involved are exempt from the new tax rate and continue to enjoy a reduced tax rate of 0.5% of the property value.

Significance for indirect share transfers

Until now, the Real Estate Transfer Tax Act only covered direct shareholdings. This is also changing, as indirect share transfers are now also affected. These occur when the shares are not transferred directly to the company that owns the property itself, but to a company higher up in the chain of shareholdings. The relevant shareholding amount is ultimately determined by multiplying the percentage shareholdings at each level of the chain.

Property transfers due to a reorganization within the meaning of the Reorganization Tax Act within a group of acquirers, i.e., within a corporation, are not classified as either an indirect share consolidation or an indirect share acquisition on the basis of the provision in Section 1 (3) (5) of the Real Estate Transfer Tax Act.

Conclusion

As a result, the amendment to the law that came into force on July 1, 2025, leads to a significant expansion of the real estate transfer tax liability for share transfers of companies that own real estate.

Emma Campbell | Paralegal

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