Establishment of additional requirements for corporations (Art. 1 Sec. 2b draft GrEStG (German Real Estate Transfer Tax Act))
Following the current legal situation in connection with partnerships (Art. 1 Sec. 2a GrEStG), the direct or indirect change of a corporation’s (holding domestic properties) existing shareholders in the amount of at least 90 % of the shares in the corporate assets within a 10-year period is supposed to constitute a legal transaction aimed to transfer the ownership in a property.
Extension of deadlines from 5 to 10 years
The current five-year periods (for example, in Art. 1 Sec. 2a GRESTG and Art. 1 Sec. 3 GRESTG as well as Art. 5 and 6 GRESTG) are supposed to be extended to ten years.
Lowering the 95% limit to 90%
The (at least) 95% participation as currently provided for by Art. 1 Sec. 2a, Sec. 3 and Sec. 3a GRESTG is supposed to be reduced to at least 90% of the shares. However, the real property’s entire value shall continue to serve as assessment basis for real estate transfer tax purposes.
Noteworthy, however, is the planned applicability of the amended provisions regarding the reduction of the participation amounts and the extension of the deadlines (Art. 23 Sec. 17 GrEStG). In deviation from previous discussions, the new provisions shall become applicable for acquisitions realized after 3December 31, 2019.
For reasons of constitutional legitimate expectations, the bill also provides for further transitional arrangements, which we will discuss separately as soon as it is foreseeable to what extent these arrangements will be adopted in the proposed form (e.g., the extension of the period from five to ten years must not result in an existing shareholder retroactively becoming a "new shareholder" due to the fact that a change of shareholders has been taken into account with retroactive effect even though the 5-year term applicable to date has already expired. On the other hand, anyone still having the status of a new shareholder on January 1, 2020 will be subject to the extension of the deadline to ten years).
This draft, too, does not seem to have dealt with the criticism voiced by associations, consultants and industry participants, in particular in connection with the creation of the supplementary requirements for corporations.
The associations are invited to comment on the draft bill until May 27, 2019. It remains to be seen to what extent there will be further adjustments, if any.