BFH rules on RETT on share deals
Global Tax Update:October 2016/Germany
Germany's Federal Tax Court (BFH) rules Real Estate Transfer Tax (RETT) should be triggered only at the time an SPA is signed, not where contractual rights are assigned in a share deal. (Global Tax Update:October 2016/Germany)
Germany’s Federal Tax Court (BFH) issued a decision on May 12, 2016, ruling that neither the assignment of rights under an agreement to purchase the shares of a company that owns real estate nor the transfer of the shares to a designated assignee at closing triggers a Real Estate Transfer Tax (RETT) liability. The BFH reversed the decision of the lower court of Cologne.
Under German law, RETT may be triggered where 95% or more of the shares in a German real estate-owning company are directly or indirectly transferred to a new acquirer or where 95% or more of such shares are combined for the first time in the hands of a single shareholder. RETT is triggered upon the signing of the share purchase agreement (SPA) and not upon the transfer in rem to the purchaser at closing.
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