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06 July 2018
On 21 June 2018 the Ministers of Finance of the Federal States agreed on new real estate transfer tax (RETT) rules for share deals.
According to official press releases, a fundamental RETT reform that had been previously discussed was not agreed. Rather, the agreement consists of new RETT rules regarding:
No draft wording of the legislation implementing the new RETT rules is in circulation. Therefore, it is not yet known when these rules will apply for the first time and to what extent they may apply with retrospective effect.
The current RETT rules for share deals operate differently for partnerships and corporations:
To specifically counteract RETT-blocker structures (so-called '94/6' structures), the legislature previously introduced a rule in 2013 pursuant to which the holding of an at least 95% economic participation is taxable for RETT purposes. This rule applies equally to partnerships and corporations.
The agreement on the new RETT rules for share deals can be summarised as follows:
The new RETT rules for share deals may also provide for other consequential amendments to the RETT Act. Since no draft wording of the legislation currently exists, the effects on specific structures are difficult to predict at present.
The officially available information on the agreed new RETT rules for share deals is silent on when these rules will take effect. Conceivably, the rules could be introduced with retrospective effect. In a worst-case scenario, transactions entered into as of 21 June 2018 might trigger RETT pursuant to the new rules.
Arguably, such an extensive retrospective application might contradict constitutional principles. However, in recent years, the case law of the Federal Constitutional Court has been less stringent in declaring tax laws anti-constitutional due to their retrospective application. Against this backdrop, transactions which have not been signed and closed before 21 June 2018 should be thoroughly reviewed – particularly if high volumes of RETT are at stake.
For further information on this topic please contact Alexander Goepfert or Martin Haisch at Noerr LLP by telephone (+7 495 799 56 96) or email (firstname.lastname@example.org or email@example.com). The Noerr LLP website can be accessed at www.noerr.com.
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