With the amendment of the Real Estate Transfer Tax Act in May of this year, the legislator changed the Real Estate Transfer Tax after a long discussion and made it much stricter in some points. For example, land transfer tax was only triggered in the case of transfers to real estate companies of more than 95% of the shares within 5 years. Now, the real estate transfer tax is already triggered in the case of a transfer of more than 90% of the shares in a consideration period of 10 years. This also applies to corporations.
In the case of real estate transactions and restructuring of real estate companies, a precise distinction must be made as to whether the real estate transfer tax is to be treated by the tax debtor as an operating expense directly affecting profit or whether it is to be capitalized as incidental acquisition costs and then deducted as an expense over the years in accordance with the depreciation period for buildings.
Differentiation according to the type of real estate transaction
In principle, a distinction is made between an “asset deal” and a “share deal”. Whereas in an asset deal the land itself is the object of purchase, in a share deal the share in a landowning company is transferred.
Depending on the type of real estate transaction, there are very different consequences in terms of real estate transfer tax and income tax.
Real estate transfer tax and asset deal
In the case of an asset deal, the real estate transfer tax must be capitalized as incidental acquisition costs of the real estate, whereas in the case of a transfer of shares in a company owning real estate, the corresponding real estate transfer tax is immediately deductible.
In addition to the land purchase agreement, the trade tax is also to be capitalized as incidental acquisition costs of the real estate in the case of transfers of real estate within the scope of a conversion.
Real estate transfer tax and share deal
The situation is different in the case of a “share deal”. In this case, the real estate transfer tax is related to the acquisition of the shares.
When planning the acquisition of shares in real estate companies, it should be noted that the real estate transfer tax can only be claimed as an expense when it has been incurred. This applies in particular to acquisition transactions that are subject to a condition precedent relating to a point in time in the future, as a result of which the tax only arises at a later point in time.