The German Tax Authorities’ interpretation of the recently introduced Sec. 1 para 3a RETTA goes beyond just preventing RETT-blockers.
Within the framework of the Act on the implementation of the Directive on administrative cooperation in the field of taxation of 26 June 2013, the legislator has included a new para 3a into Sec. 1 RETTA, effective from 7 June 2013 (see Tax Info No. 21/2013). This new provision aims at preventing so-called RETT-blocker structures, by means of which purchasers of real estate owning companies could avoid RETT by using intermediary companies of which they held most (if not all) shares. The new Sec.1 para. 3a RETTA stipulates that acquisitions are subject to RETT if, after the acquisition, a legal entity directly or indirectly holds an economic ownership of at least 95% in a real estate owning company. The economic ownership is composed of the direct and indirect ownership in the capital and the assets of the real estate owning company. In determining the indirect ownership the company’s participation quotas are multiplied at each level (calculation down the chain). The German Tax Authorities have now published a new decree dealing with numerous questions having arisen in connection with the new provision.
The decree of 9 October 2013 first clarifies that the mere commencement of the new provision does not trigger any taxation for old cases. Also, an economic shareholding of 95% or more in a real estate owning company from before 7 June 2013, which is subsequently increased, is not taxable by virtue of Sec. 1 para 3a RETTA. This does not, however, prevent the taxation of new acquisitions by the real estate company according to Sec. 1 para 2a or para 3 RETTA.
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