Real estate transfer tax (GrEStG), with tax rates that have now risen by up to 6.5%, is often an obstacle to restructuring or represents a considerable deferred or actual tax burden for the taxpayers concerned with companies that hold real estate.
In order to avoid an excessive (multiple) burden, particularly in the case of intra-group transactions, the legislation had created favourable exceptions with the group clause of Section 6a GrEStG, among other things. A ruling by the BFH on 30 May 2017 (II R 62/14) resulted in a referral to the ECJ to clarify the question of whether the preferential treatment under Section 6a GrEStG constitutes prohibited state aid. As a result, this favourable provision was effectively invalidated for taxpayers in practice. This is because the taxpayer could not have relied on this promise even if binding information had been provided. As a result - if an unnecessary tax burden was not to be accepted - reorganisations were either put on hold or a transaction had to be carried out without recourse to Section 6a GrEStG in order to avoid real estate transfer tax.
In its judgement of 19 December 2018 (RS C-374/17), the ECJ has now agreed with the Advocate General's Opinion of 19 September 2018 and ruled that Section 6a GrEStG does not constitute prohibited state aid under EU law.
What does this mean in practice?
The previous legal uncertainty and de facto inapplicability of Section 6a GrEStG due to European law no longer exist. For planned or postponed transactions, this standard can once again be included in the planning. It should be noted that it should continue to be applied with the utmost care with regard to tax-damaging arrangements, as several proceedings on the interpretation of Section 6a GrEStG are pending at the BFH (including BFH II R 50/13, BFH II R 36/14, BFH II R 62/14, BFH II R 58/14, BFH II R 63/14, BFH II R 56/15, BFH II R 53/15) and the provision was interpreted very restrictively by the tax authorities in a state decree that has already been revoked (see FinMin BaWü of 1 December 2010 in conjunction with BMF of 24 March 2014). In many cases, binding information will be appropriate despite the welcome ECJ case law. Furthermore, a general all-clear cannot be given with regard to the issue of state aid in the case of favourable tax standards.
Finally, it should be noted that the plan to tighten the rules on share deals is unlikely to be abandoned and that certain tax arrangements may already be subject to a (future) reporting obligation (see TAXGATE News from 23.10.2018).
Yours TAXGATE Team specialises in real estate transactions and will be happy to answer any questions you may have, in particular regarding real estate transfer tax law, reorganisation tax law and international tax law.
