German Growth Opportunities Act: Elimination of real estate transfer tax exemptions for partnerships as of 2024
In the present government draft of the so-called “Growth Opportunities Act” of August 30, 2023, a decision is imminent on the question of how partnerships will be treated for real estate transfer tax purposes after the German Partnership Law Modernization Act (“MoPeG”) comes into force as of January 1, 2024.
Pursuant to Article 39 of the Draft, the tax concessions pursuant to Art. 5 and 6 German Real Estate Transfer Tax Act (“GrEStG”) in the currently applicable version shall continue to apply until the expiry of the subsequent holding periods for transfers realized by December 31, 2023, subject to the condition that the joint ownership’s assets will be replaced by the company assets within the meaning of the MoPeG.
This means that the MoPeG’s coming into force will not – as has been feared – result in a breach of an already running subsequent holding period pursuant to Art. 5, 6 and 7 GrEStG, provided the underlying facts are realized by December 31, 2023. This provides taxpayers with legal certainty for their transactions executed in the past.
Vice versa, the German federal government no longer sees any scope for applying the benefits to partnerships in the future due to the abolition of the joint ownership (Gesamthand). Transactions or restructurings which have previously been tax-advantaged for real estate transfer tax purposes would thus be fully subject to real estate transfer tax in the future. If transactions are currently being considered in order to take advantage of the benefits under Art. 5, 6 and 7 GrESt, it is strongly recommended that they be carried out in the course of 2023 so that the benefits can still be claimed.
According to the explanatory memorandum, it remains to be seen whether and in what form corresponding tax benefits will be available in the future. In this context, it also remains to be seen whether the draft for a comprehensive reform of the Real Estate Transfer Tax Act (Real Estate Transfer Tax Amendment Act), which was also recently published, will actually come into force on January 1, 2024, as envisaged in the draft.