There is a risk of double taxation for share deals signed before 1 July 2021 but closed after that date.
You need to look particularly closely at current transactions and forward share deals that were concluded in the past but have not yet been closed.
According to the RETT law still in force until 30 June 2021, the signing of a purchase agreement for shares in a company owning German real estate triggers RETT if at least 95% of the shares in this company are transferred to one purchaser or a group of affiliated purchasers (Sec. 1 para. 3 no. 3 RETT Act). This is also the case if at least 95% of the shares are directly or indirectly unified in one hand as a result of the transfer (Sec. 1 para. 3 no. 1 RETT Act).
According to the wording of the law still applicable, this does not apply if a taxation under Sec. 1 para. 2a RETT Act comes into consideration. Sec. 1 para. 2a RETT Act only refers to changes of partners in partnerships and stipulates that the transfer of interest in a partnership within a certain timeframe triggers RETT irrespective of whether the interest is transferred to one or several (not related) persons.
With the aforementioned reservation, the law gives priority to the application of Sec. 1 para. 2a RETT over that of Sec. 1 para. 3 RETT Act. The consequence of this is that the signing of a share purchase agreement for at least 95% of the interest in a partnership does not trigger RETT but only the (usually later) transfer of the shares to the transferee.
Since Sec. 1 para. 2a RETT Act only applies to partnerships, this priority does not apply in the case of a share purchase agreement for shares in a corporation. The consequence of this is that the conclusion of a share purchase agreement for at least 95% of the shares in a corporation or a corresponding unification of shares already triggers real estate transfer tax pursuant to Sec. 1 para. 3 no. 1 or 3 RETT Act (current version).
As of 1 July 2021, the new Sec. 1 para. 2b RETT Act will apply to corporations a regime according to which, analogously to Sec. 1 para. 2a RETT Act, changes of shareholders in corporations will be subject to RETT; according to this provision, changes of shareholders in corporations trigger RETT if at least 90% of the shares in a corporation are transferred to one or more new shareholders within ten years. The event triggering RETT is the change of shareholders, i.e. the closing of a share purchase agreement.
For transactions where the purchase agreement is signed before 1 July 2021, RETT will be triggered according to Sec. 1 para. 3 RETT Act as described above which will still be applicable.
If the closing occurs after 1 July 2021, i.e. at a point in time when the new Sec. 1 para. 2b RETT Act is already in force, also the transfer triggers RETT, this means that there will be a double taxation with RETT.
The reason for this is, on the one hand, that the wording of sec. 1 para. 3 RETT Act (current version) does obviously not exclude that RETT is triggered upon signing of an SPA in cases where Sec. 1 para. 2b RETT Act (new version) comes into consideration since this new provision is not yet in force. On the other hand, the new law lacks a specific transitional provision blocking the applicability of Sec. 1 para 2b RETT Act in these cases or reversing the RETT incurred upon signing under the old law.
Double taxation with RETT in relation to the same event contradicts the general principles of current German RETT law. However, it is currently unclear how the tax authorities will deal with cases that (formally) trigger RETT twice because the signing takes place before and the closing after 1 July 2021.
Even if the tax authorities recognise the "error" of the law and want to avoid the double taxation, it is currently not clear which of the two events (signing or closing) they consider relevant for RETT purposes and which they suspend. Therefore, it cannot be ruled out that the tax authorities will initially, in accordance with the current law, impose RETT on the conclusion of the purchase agreement without it being certain at this point how they will assess the closing with regard to RETT.
Against this background, an appeal should be filed against this first assessment notice in order to keep the case open until a possible second RETT assessment notice is issued, which refers to the closing of a transaction relevant for RETT.
