Buying the company instead of the building was for a long time the ordinary way to move German real estate without paying Grunderwerbsteuer on it. The property never changed owner. The shares did, and shares are not land. Provided enough of the equity stayed where it was, the charge simply did not arise, and the residual holding was parked with a co-investor for a period and then collected.
That planning has been closed in stages, and the position now is materially different from the one most people carry in their heads. The threshold is lower, the observation period is longer, four separate provisions catch a share transaction rather than one, and where the charge does arise it is not computed on what the buyer paid. For a Dutch structure holding German property the analysis has to be done before the shares move, because the events that cross the line include several that nobody regards as a sale.
What a share deal is measured against
Section 1 of the Grunderwerbsteuergesetz charges transactions concerning domestic land. A transfer of shares is not such a transaction on its face, which is why the statute reaches it through separate deeming provisions rather than through the ordinary charging rule. Those provisions treat a sufficient change in the ownership of an entity that holds German land as though the land itself had passed to a new owner.
The distinction matters for how the tests are read. They are not anti-avoidance rules requiring a purpose to be established. They are mechanical, they operate on percentages and dates, and they apply whether or not anyone was thinking about transfer tax at the time. A reorganization undertaken for wholly unrelated reasons crosses them exactly as a sale does.
There are four of them and they overlap. A single transaction can fall within more than one, and the statute allocates between them rather than allowing a taxpayer to select whichever is most convenient.
Ninety per cent, and ten years where the statute says ten years
Section 1(2a) applies to partnerships. Where the membership of a partnership holding domestic land changes within ten years such that at least 90 per cent of the interests in the partnership assets pass to new partners, the case is treated as a transfer of the land to a new partnership. Section 1(2b) applies the same construction to corporations: a change within ten years under which at least 90 per cent of the shares pass to new shareholders. In both, an interposed corporation counts in full as a new member where at least 90 per cent of its own shares pass to new holders, and acquisitions on death are left out of the percentage.
Those are the two figures most often quoted from memory at the older levels. The current text says 90 per cent and ten years. It does not say 95 per cent and it does not say five years, and the older figures no longer appear anywhere in the section. A structure designed around a retained holding of just over 5 per cent and a wait of five years is designed against a version of the statute that has been superseded. The current wording of subsections 2a, 2b, 3 and 3a first applies, under the transitional rules in section 23 of the Grunderwerbsteuergesetz, to acquisitions realised after 30 June 2021, and the grandfathering that kept the former subsection 2a alive for changes in partnership membership ran only to 30 June 2026.
The ten year period is what does the damage in those two subsections, because it is a rolling window rather than a single measurement. Shares transferred in year one and shares transferred in year eight are counted together. A Dutch holding that admits an investor, buys out a founder and later sells a tranche to a fund can cross the line without any one of the three transactions having been large.
Two further triggers, with no time limit at all
Section 1(3) deals with consolidation, and the ten year window of subsections 2a and 2b has no counterpart in it. Where a transaction gives rise to a claim to the transfer of, or actually results in, at least 90 per cent of the shares in a company holding domestic land coming into the hand of the acquirer, or into the hands of controlling and dependent undertakings or dependent persons, the charge arises. There is no time period anywhere in that paragraph. It is a test of the state of affairs, not a window.
Section 1(3a) closes the chain, and it too runs without a period. It applies only so far as the transaction is not already caught by subsection 3. An economic participation of at least 90 per cent in a company holding domestic land triggers the charge, and the participation is computed by adding the direct and indirect holdings in the capital or the assets of the company, multiplying the percentages through the intermediate entities. Take a Dutch holding with 85 per cent of the German property company directly, and a further 60 per cent of an intermediate that itself holds 20 per cent of the same company. Multiplying through the intermediate turns that second route into 12 per cent, the two are added, and the economic participation is 97 per cent. Neither of the two holdings reaches 90 per cent on its own, and the register shows a direct stake of 85, which is why the addition has to be done before the shares move rather than after.
Section 1(2c) removes transfers of listed shares from the counts under the first sentences of paragraphs (2a) and (2b), where the trading takes place on an organized market in Germany, in another Member State of the European Union or in another contracting state of the Agreement on the European Economic Area, or on a third country trading venue declared equivalent by the European Commission. That is relief for quoted groups and nothing at all for the private ones this analysis usually concerns.
The base is not the price
The second common error is to assume that where the charge arises it falls on the purchase price of the shares, apportioned to the property. It does not.
Section 8 of the Grunderwerbsteuergesetz measures the tax by the value of the consideration in the ordinary case. Section 8(2) displaces that in four situations, and the third of them covers precisely the cases in section 1(2a) to (3a). In those cases the base is the land value determined under section 151(1) sentence 1 number 1 in conjunction with section 157(1) to (3) of the Bewertungsgesetz. Section 9, which defines consideration, is built around purchase, exchange, enforced sale and expropriation, and has no work to do once section 8(2) has taken the case away from section 8(1).
The consequence is that the price negotiated for the shares is irrelevant to the charge. A company acquired cheaply because of the debt it carries is taxed on the gross statutory value of the land, not on the equity. A deal struck at a discount to reflect a difficult tenant is taxed on the same statutory value. Buyers who model the transfer tax as a percentage of the equity price understate it whenever the property is leveraged, which is most of the time.
Section 3 number 1 exempts an acquisition where the value relevant for computing the tax does not exceed 2,500 euros, and it is an exemption limit rather than an allowance. Section 3 number 2 exempts acquisitions on death and gifts inter vivos within the meaning of the Erbschaftsteuer- und Schenkungsteuergesetz, which is where transfer tax planning and succession planning meet.
What is left of the intra-group escape
Section 6a of the Grunderwerbsteuergesetz provides that the tax is not levied on certain reorganizations within a group, and most restructuring plans depend on it. Its conditions are stricter than the thresholds elsewhere in the statute and are regularly misremembered as matching them.
Sentence 3 requires that only a controlling undertaking and one or more companies dependent on it, or several companies dependent on one controlling undertaking, take part in the transaction. The dependency defined in sentence 4 is a holding of at least 95 per cent, not 90, in the capital or the assets of the company, held without interruption for five years before the transaction and five years after it. Sentence 2 extends the relief to corresponding reorganizations under the law of a Member State of the European Union or of a state to which the Agreement on the European Economic Area applies, and sentence 5 carries a carve-out for cases where the five year holding after the transaction fails for no reason other than the United Kingdom’s withdrawal from the European Union.
The five year holding period after the transaction is what makes section 6a awkward in a structure being prepared for sale. Relief obtained on an internal reorganization is lost if the group then disposes of the relevant participation within the following five years, which is precisely what a pre-sale reorganization exists to enable. Groups that restructure in order to sell should assume the two objectives are in tension and price the risk into the timetable.
The rate is a Land decision
Section 11 of the Grunderwerbsteuergesetz provides that the tax is 3.5 per cent, rounded down to whole euros. The section itself says nothing about the Länder. The power to depart from that figure sits in article 105(2a) sentence 2 of the Grundgesetz, which gives the Länder the authority to determine the rate of Grunderwerbsteuer.
The federal 3.5 per cent is therefore a default and not a national rate. The operative figure is set by the statute of the Land in which the parcel lies, and it has to be read out of that statute rather than out of the federal consolidation, because the sixteen Länder named in the preamble to the Grundgesetz legislate on the point separately.
For a portfolio spread across several Länder this is not a detail. The charge under section 1(2b) arises in respect of each parcel, at the rate of the Land in which that parcel sits, on the statutory value of that parcel. A single share transfer can therefore generate several assessments, from several authorities, on several different bases, none of which is the price.
The notification duty, and the month attached to it
Section 19 of the Grunderwerbsteuergesetz requires the parties liable for the tax to notify within one month of learning of the notifiable event, and paragraph 1 of the same section lists the share transaction triggers at numbers 3a, 3b, 4 to 7 and 7a, alongside the ordinary ones. Section 19(5) provides that the notification is a tax return within the meaning of the Abgabenordnung, and section 19(6) fixes the late filing surcharge by reference to section 152(5) sentence 2 of the Abgabenordnung while disapplying both the discretion in section 152(6) and the cap in section 152(10).
Two things follow. The duty applies even where the transaction is exempt, so a group relying on section 6a still has to file. And because the notification is a return rather than an information notice, missing it carries the consequences of a missed return rather than those of a missed form.
Section 20(2) sets out what a share deal notification must contain beyond the ordinary particulars: the name of the company, its place of management, its Wirtschafts-Identifikationsnummer under section 139c of the Abgabenordnung, the identification of the shares concerned, and, where several entities are involved, a participation overview. The two week deadline that people sometimes recall is a different duty altogether. It is in section 18(3) and it binds courts, authorities and notaries, not the parties.
The rest of the German charge, and the treaty above it
Transfer tax is one line in a longer analysis. A Dutch company letting German property has German source income under section 49(1) number 2 letter f of the Einkommensteuergesetz, which covers letting and disposal of domestic immovable property and provides, in sentence 4, that income from such activity earned by a corporation within section 2 number 1 of the Körperschaftsteuergesetz that is comparable to a German corporation counts as business income. The corporate tax on it is 15 per cent for assessment periods up to 2027, falling by one point a year from 2028 to reach 10 per cent for assessment periods from 2032, with the solidarity surcharge of 5.5 per cent under the Solidaritätszuschlaggesetz 1995 on top of it.
Trade tax then becomes the question, and section 9 number 1 of the Gewerbesteuergesetz answers it. The extended reduction in sentence 2 is available on application to an undertaking that exclusively manages and uses its own real property, or manages and uses its own real property together with its own capital assets, and it survives where the undertaking in addition supervises residential construction or builds and sells one and two family houses or condominiums. Sentence 3 permits limited ancillary income: electricity supplied from renewable energy installations or from charging points for electric vehicles and electric bicycles, not exceeding 20 per cent of the income from making the property available for use, and income from direct contractual relations with the tenants out of other activities, not exceeding 5 per cent of that same figure. Exceeding either limit costs the reduction on everything. Sentence 5 number 1 removes the reduction altogether where the property serves, wholly or in part, the business of a shareholder or member, which is the condition that catches a group housing its own operations in the property company.
The treaty confirms the German position rather than restricting it. Article 6 of the convention between the Netherlands and Germany signed at Berlin on 12 April 2012 allows the state in which the property is situated to tax income from it, including income from letting, and article 13(1) does the same for gains on its disposal. The version to work from is the one in force, which the Dutch Verdragenbank marks as running from 31 December 2025, and not the text that applied until 30 July 2022, because the two differ on the point that matters.
Article 13(2) in force extends the situs state’s right to gains on the alienation of shares in a company, or comparable interests, that are not quoted on a recognised stock exchange, where at any moment during the 365 days preceding the disposal more than 75 per cent of the value of those shares or interests was directly or indirectly determined by immovable property situated in that other state, leaving out of account property in which the company or the holders carry on their business. The gain is taxable only in the state of residence if the resident held less than 50 per cent of the shares or comparable interests before the first disposal, or if the gain arises out of a business reorganization, merger, division or similar transaction. The look back is the part that is easy to miss: stripping the property out of the company shortly before the share sale does not remove the German taxing right, because the test looks at any moment in the preceding year. Article 13(4) of the OECD Model Tax Convention is built the same way over the same 365 days, at a threshold of 50 per cent rather than 75. Selling the Dutch company that owns the German building is not, on its own, a way of taking the gain out of Germany either.
The Dutch side of the same structure
The mirror question is whether the Netherlands charges its own transfer tax when the shares in the holding move, and for German land the answer is that it does not. Article 2 of the Wet op belastingen van rechtsverkeer charges overdrachtsbelasting on the acquisition of immovable property situated in the Netherlands. Article 4(1)(a) deems shares in a legal person to be such property where its assets, at the time of the acquisition or at any time in the preceding year, consist or have consisted for the greater part of immovable property and at the same time at least 30 per cent of the assets consist or have consisted of immovable property situated in the Netherlands, the property as a whole serving wholly or mainly the acquisition, disposal or exploitation of that property. A holding whose only real estate is German fails the 30 per cent Dutch situs condition and falls outside the deeming rule.
Where the condition is met, the charge still arises only on an acquisition that reaches the thresholds in article 4(3): a third or more of the interest for a legal person counting connected entities, and for a natural person a third or more counting the spouse, relatives in the direct line and to the second degree in the collateral line and connected entities, together with an interest of more than seven per cent held alone or with the spouse. The rate in article 14 is 10.4 per cent generally, 8 per cent for the acquisition of a dwelling and for shares to the extent they relate to a dwelling, and 2 per cent for a natural person acquiring a dwelling that will be occupied as a main residence other than temporarily, on a clear and unconditional written declaration made before the acquisition. For a German portfolio held through a Dutch entity the German figures are the ones to model, and the Dutch charge is relevant only if Dutch property enters the same balance sheet.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.