I. Introduction
With two most recently published decisions the German Federal Fiscal Court (“Bundesfinanzhof, BFH”) has confirmed and somehow clarified his opinion on the attribution of real estate properties for Real Estate Transfer Tax (RETT) purposes in group structures (BFH, 14.12.2022, II R 33/20; II R 40/20, BFH, 01.12.2021, II R 44/18). In case of group companies holding real estate properties the attribution of such properties to the (ultimate) parent company or other group companies might lead to substantial double taxation risks in terms of RETT.
II. Decisions of BFH
Under the German RETT Act RETT can be triggered either by way of an asset deal or under certain requirements by way of a share deal. The attribution of the real estate property might be questionable in certain cases. In the afore mentioned two decisions, which were taken with respect to a trustee relationship on the one hand and a group restructuring on the other hand, the BFH ruled—in line with an earlier decision in 2021—that the question of the attribution of a property for RETT purposes would neither refer to criteria of civil ownership, i.e., an entry in the land register, nor economic ownership, but would be based on its own criteria. According to that understanding, the real estate would be attributable to the entity to which a real estate property has been transferred by way of a RETT-taxable transfer, if not a later RETT taxable transfer to a third‑party took place.
Furthermore, the court expressly confirmed that such concept of attribution of a real estate property would also apply in corporate group situations (as it did in its previous decision, BFH, 01.12.2021, II R 44/18 annot. 25). Consequently, real estate owned directly or indirectly by a subsidiary is attributable to a parent company if a RETT-taxable transfer to such parent company took place, e.g., if the parent company acquired at least 90 percent or more of the shares of the property-owning subsidiary. However, the BFH makes clear that solely the fact that a subsidiary is the civil or economic owner of real estate wouldn`t automatically cause such an attribution of the real estate to the parent company. If the property is attributed to the parent company changes in ownership, the property might lead to a RETT-taxable event at the parent company level rather than the subsidiary. Potentially, such attribution might lead to a double attribution resulting in double taxation.
III. Assessment
Although these two decisions of the BFH are mainly in line with his previous decision regarding the attribution of real estate, the concept of attribution of real estate under the RETT-Act is upheld and expressly extended to group structures and trustee relationships. As a consequence, the attribution to an entity will continue to depend on the timing of the acquisition of the real estate property: If a parent company first acquires at least 90 percent or more of the shares of an entity that then obtains real estate in Germany, an attribution of such real estate property to the parent company remains questionable and might lead to double taxation.
IV. Outlook
Before starting group restructurings involving group companies that own German real estate property, the attribution for RETT purposes needs to be reviewed, carefully. If the attribution isn`t finely clarified, the actual transfer of the asset or the shares might lead to RETT at a different corporate level than expected, and in the worst case, it might lead to double taxation. This is also true in case of restructurings at a different corporate level, even outside Germany, or in certain trustee relationship situations.
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