On April 21, 2021, the German federal parliament passed a new law that amends the German Real Estate Transfer Tax (RETT) Act. The new rules will lead to a significant tightening of the taxation of share deals whenever real estate property located in Germany is involved.

Key amendments include the following:

  • Lowering of the participation threshold (from 95% to 90%);
  • Extension of the minimum holding period (from 5 to 10 years; in certain cases even to 15 years);
  • Taxation of the direct and indirect transfers of at least 90% of the shares in corporations that own real estate within 10 years (not applicable to companies listed on a stock exchange).

The changes will come into force on July 1, 2021.

Final adoption of the new law is expected in May 2021, and it is very unlikely that the German legislator will add significant last-minute changes.

This client alert provides an overview of the amendments and their potential impacts. It is relevant to all corporations and partnerships worldwide that own real estate in Germany and are planning a change in ownership, as well as to all investors worldwide who wish to acquire German real estate property by way of a share deal. Further, the changes are also relevant for all of these transactions that have been agreed upon prior to July 1, 2021 but will be executed after that date.


In Germany, a direct transfer ("asset deal") of real estate located in Germany is subject to RETT. The tax rate depends on the individual federal state and varies between 3.5 and 6.5% of the purchase price.

Under certain circumstances, RETT can also be realized upon a share deal. In the current legal environment, RETT is triggered upon a share deal if:

  • Within five years, 95% of the interest in a partnership that owns real estate in Germany is directly or indirectly transferred to new partners ("Taxation of the Transfer of Shares"); or
  • A person or group of related persons directly or indirectly acquires shares in a company (partnership or corporation) owning real estate in Germany, with the result that such person or group of persons holds at least 95% of the shares in that company ("Taxation of the Unification of Shares").

Currently, it possible to mitigate RETT exposure in share deals by setting up certain structures where the aforementioned participation threshold and holding period are not exceeded.

For example, it is common that

  • Only 94.9% of the interest in a partnership is transferred within the five-year holding period. After the lapse of five years, the seller transfers the remaining 5.1%, without triggering RETT; or
  • The transfer of shares in a real-estate owning corporation is split, with the main investor acquiring 94.9% of the shares and an unrelated co-investor acquiring the remaining 5.1% of the shares, without triggering RETT.

With the amendments that have now been passed, the previously established structures to mitigate RETT exposure will no longer function for future share deals. This needs to be taken into account if shares or interests in a company owning German real estate are transferred.


Effective on July 1, 2021, the aforementioned participation threshold will be lowered to 90% and the minimum holding period will be extended to 10 years, in certain cases even to 15 years. Further, the rules on the Taxation of the Transfer of Shares will be applicable not only to partnerships but also to corporations.

As a result, after June 30, 2021:

  • A direct or indirect transfer of at least 90% of the shares in a real estate-owning company within 10 years to new partners or shareholders (irrespective of whether the company is a corporation or partnership) or
  • Transactions that unify at least 90% of the shares or interests in a company in one person or a group of related persons 

will trigger RETT.

Exemptions will apply to the Taxation of the Transfer of Shares of companies listed on a stock exchange in the European Union, the European Economic Area or on a stock exchange that has been declared equivalent by the European Commission. Special rules will also apply to transfers within a tax group, where the previous participation threshold and holding period remain in force.


The new rules shall be effective on July 1, 2021.

The rules also apply to transactions where the signing has already taken place but the closing and the transfer of the real estate property will not be completed before July 1, 2021.

Further, the previous law continues to apply in all cases not covered by the new law. Shareholders who held shares of at least 90% but less than 95% on June 30, 2021, will continue to be subject to the old participation threshold of 95%, even after the new regulation has come into force. It is therefore not possible to benefit from the new regulation by increasing the 92% of shares owned on June 30, 2021 to 100% after July 1, 2021.

However, for the new regulation for corporations on the Taxation of the Transfer of Shares, shares already transferred before July 1, 2021 are not to be counted in the 90% threshold.


The new German RETT rules will most likely result in a significantly longer holding period for changes in ownership of real estate companies. Effective on July 1, 2021, only a maximum of 89.9% of the shares or interests can be transferred within 10 years of purchase without incurring RETT. In certain cases of partnerships, even 15 years need to have lapsed.

Structures for reducing RETT on share deals that have been built and used in the past will thus become significantly less attractive in the future.

Further, each share deal will need to be carefully reviewed if German RETT is triggered unexpectedly by the transfer of shares. In former and ongoing transactions, it will be necessary to check whether the new regulations already apply or whether holding periods still have to be monitored in accordance with the old regulations.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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