On 6 June 2023, the Federal Ministry of Finance (BMF) published the identical decrees of the supreme tax authorities of the federal states on the application of § 6a of the German Real Estate Transfer Tax Act (GrEStG). The background is the fact that with the Act Amending the GrEStG of 12 May 2021, in addition to the amendment of § 1 para. 2a of the GrEStG and the insertion of a new para. 2b in § 1 of the GrEStG, the scope of application of the tax relief in § 6a of GrEStG was extended to include this new acquisition transaction with effect from 1 July 2021.
Consequently, the new decrees and their respective examples essentially reflect the legal situation after 30 June 2021 and thus also take into account all changes in the law in the meantime, such as, in particular, the extension of the special provisions for property-owning partnerships to property-owning corporations, the extension of the retention period from five to ten years and the lowering of the relevant participation threshold from 95 % to 90 %.
The new identical decrees replace the previous decrees of 22 September 2020 and shall apply in all open cases.
Background
Pursuant to § 6a of the GrEStG, real estate transfer tax is not levied on the transfer of ownership of real estate or the transfer of shares in real estate-owning companies if the transfer is based on certain restructuring/transformation transactions. The provision contains an independent tax relief for the legal entities involved in an acquisition transaction eligible for relief. The group of legal entities involved is limited to the controlling company and/or companies dependent on it. In this context, certain pre- or post-retention periods are to be observed
Determination of the controlling company
In addition to editorial amendments to the legislative changes, the most significant change in the content of the decrees is the now adopted determination of the controlling company.
The tax authorities had already somewhat relinquished their very restrictive view within the decrees of 22 September 2020 and had followed the BFH case law. In addition to legal entities and partnerships, the controlling enterprise can also be a natural person or a sole proprietorship, provided there is an economic activity. Thus, it is sufficient for the existence of an economic business operation if the controlling company only participates in the market through an interest in a dependent company.
The new aspect here is that this also applies to companies that are not economically active themselves, e.g. pure holding companies and shelf companies.
Furthermore, the tax authorities have also followed the case law of the BFH (ruling II R 13/20 of 28 September 2022) with regard to the unresolved question of whether the controlling company pursuant to § 6a GrEStG must always be the top legal entity in the chain of shareholdings (and thus, as a rule, the top management of the group).
In order to determine the controlling company in the case of multi-level shareholdings, it is no longer necessary to determine from the "bottom" to the "top" the top economically active legal entity that fulfils the minimum shareholding level of 95 % or 90 %.
Instead, the determination of the controlling company is based on the respective restructuring process for which the tax is not to be levied pursuant to § 6a sentence 1 GrEStG. To the extent that the law speaks of a controlling enterprise, it initially refers to the enterprise directly involved in the taxable transformation transaction, provided that such enterprise exists. It is irrelevant whether, in the case of multi-level shareholdings, the controlling company itself is dependent on one or more other companies. It is also irrelevant whether, in the case of dependent companies, further companies are dependent on the controlling company if these companies or companies themselves are not involved in the transformation transaction. If several companies dependent on a controlling company are involved in the transformation transaction, then, based on the transformation transaction, the (lowest) legal entity in the chain of ownership that complies with the requirements pursuant to section 6a, sentences 3 and 4 GrEStG is the controlling company. Here, too, it is irrelevant whether, in the case of multi-level shareholdings, the controlling company itself is dependent on one or more other companies.
The controlling company thus determined must then also comply with the retention period.
Furthermore, the explanations on the relevance of the pre- or post-retention period are supplemented. These do not have to be observed insofar as this is not possible in view of the mandatory consequences under transformation law.
Amendments applicable to inheritance/succession cases
The new decrees also contain a significant clarification with regard to inheritance cases, where a distinction must be made: A transfer of the company by way of (advance) bequest or anticipated succession generally violates the retention period of § 6a GrEStG in view of the only claim under debt law. The retention period only continues in the case of universal succession of a natural person (by way of inheritance).
Practical Implications
In a further step, the new decrees contribute to legal certainty by adapting to the changes in the law and by adopting the latest BFH case law for corresponding tax structures.
Unfortunately, the BMF letter does not make any corrections to disadvantageous opinions in other areas. For example, the spin-off of a sole proprietorship to a newly founded corporation is still not covered by § 6a GrEStG. In addition, the regulation continues to be inapplicable if an intra-group restructuring leads to a breach of the retention periods pursuant to §§ 5 and 6 GrEStG.