New Developments For Real Property Transactions

On July 9, 2014, the German Supreme Fiscal Court decided a real estate transfer tax ("RETT") case that shines a new light on RETT structures. Contrary to the long-standing interpretation of the law, the court took the position that aspects of economic ownership are also relevant for RETT purposes.

Until now, it was the unanimous agreement of tax experts in literature, legislation, and courts that for RETT purposes, the civil law position and structure determines whether or not RETT is triggered in a transaction. Now the Supreme Fiscal Court has held that in cases where the law refers to indirect transfer of a property, the civil law structure is not relevant alone. In such a case, the rules stipulating economic ownership approach might be applicable.