Act to Modernize German Tax Consultancy introduces far‑reaching changes to German RETT

Following the publication of the Ninth Act Amending Provisions of the Tax Consulting Act and Tax Legislation (9. StBerÄndG) in the Federal Gazette on 2 July 2026 (Bundesgesetzblatt 2026, I, No. 197), several practically relevant changes to the German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz) (the "RETT-Act") have taken effect.

The key change is the introduction of a new section 1(3b) of the RETT-Act. It reshapes how the provisions on share consolidation and block sales (sections 1(3) and 1(3a) of the RETT-Act interact with the rules on “transfer events” (indirect transfers of real estate through the transfer of company shares) (sections 1(2a) and 1(2b) of the RETT-Act).

In addition, notification obligations have been expanded, the notification deadline has been extended and preferential treatment for partnerships has been made permanent.

A. Priority of signing over closing

1. Background

Under the law previously in force, in the case of a share deal, both the contractual aspect of the transaction (signing) under section 1(3) or 1(3a) of the RETT-Act and the subsequent transfer in rem (transfer of title/closing) under section 1(2a) or 1(2b) of the RETT-Act constituted events triggering real estate transfer tax. Following a period of uncertainty regarding the interaction of these taxable events, the legislature addressed the issue mainly by introducing section 16(4a) of the RETT-Act. This provision gave priority to the assessment of real estate transfer tax at the stage of the transfer of the shares in rem (closing). However, section 16(4a) RETT-Act applied only under strict conditions, most notably the complete, accurate and timely fulfilment of the real estate transfer tax notification obligations for both signing and closing.

In practice, this approach created considerable difficulties, particularly given the tight notification deadlines, and led to significant risks of double taxation.

2. Priority of share consolidation over provisions that tax transfer events

The new section 1(3b) of the RETT-Act now expressly provides that the transfer events under sections 1(2a) and 1(2b) RETT-Act do not apply where shares are transferred in fulfilment of a transaction that has already triggered real estate transfer tax under section 1(3) or 1(3a) of the RETT-Act.

The amendment reverses the previous relationship between the events triggering real estate transfer tax. In future, the contractual transaction (signing) will be decisive. The subsequent transfer of the shares in rem (closing) will no longer trigger any further liability for real estate transfer tax, provided that the composition of the real estate portfolio has not changed in the interim. In this context, section 16(4a) of the RETT-Act is repealed for new cases.

3. Transitional arrangements for pending transactions

The new transitional rule in section 23(29) of the RETT-Act is of practical relevance. It extends the new regime to transactions

• whose signing occurs before 3 July 2026,
• but whose closing does not take place until after 2 July 2026.

In such cases, it has now been made expressly clear that taxation arises exclusively under sections 1(3) and 1(3a) of the RETT-Act. Section 16(4a) of the RETT-Act no longer applies to these cases either.

For ongoing transactions, this means that for closings on or after 3 July 2026 the tax authorities can be expected to promptly assess taxable events that occurred at signing. An additional notification of the closing under section 1(2a) or 1(2b) of the RETT-Act by the property-holding company is therefore no longer required, provided no additional real estate has been acquired in the interim.

4. Extension of liability for tax and of notification obligations under the RETT-Act

To safeguard tax revenue, the provisions on liability for tax in sections 13(5) and 13(8) of the RETT-Act have also been amended. This means that the property-holding company will now be treated as the taxpayer in all relevant cases, alongside the purchaser and, where applicable, the seller. Since the notification obligations under section 19 apply to each taxpayer, the amendment gives rise to an additional notification obligation for the property-holding company, which must be observed with immediate effect.

The issue of tax liability in a parent-subsidiary relationship raises the follow-up question of whether in cases under section 1(3) or 1(3a) of the RETT-Act a structure where a property-holding subsidiary bears the real estate transfer tax alone will in future allow it to fully deduct the payment as a business expense, or whether its payment might be characterised as a hidden profit distribution to its parent. In our view, there are strong arguments against assuming a hidden profit distribution in these cases, since the subsidiary is satisfying its own tax liability. However, it would be desirable for the tax authorities to set out a clear view on this issue, comparable to their previous guidance on the income tax treatment of real estate transfer tax in cases under the former sections 1(2a) and 1(3) of the RETT-Act. Until such guidance is available, potential advantages and disadvantages of any allocation of real estate transfer tax should be carefully weighed up and, where appropriate, set out in a contract.

5. Uniform one-month notification period

In future, all persons subject to a requirement to notify must report the transaction within one month of becoming aware of it. The previous two-week period for domestic taxpayers no longer applies. Standardising the notice period to one month creates clarity and removes the previous difficulties in distinguishing between domestic and foreign taxpayers.

However, the addition that in future tax-exempt or tax-privileged transactions will also be subject to notification obligations will result in an additional administrative burden for taxpayers.

B. Expansion of the tax base for forward deal structures

Under the new version of section 8(2) of the RETT-Act, for acquisitions under section 1(1), 1(2), 1(3) or 1(3a) of the RETT-Act that are based on a pre-existing property development plan, the tax base will in future be the value of the property in its completed, developed state. For real estate transfer tax, what matters is the value of the property at the time the building is completed, based on the actual circumstances then.

Previously, planned but yet-to-be-constructed buildings could be taken into account in the tax base for cases under section 1(1), 1(2), 1(3) or 1(3a) of the RETT-Act only where the courts and tax authorities applied the principle of what is known as the “single object of acquisition”. The legislature now expressly extends the tax base for the above-mentioned acquisitions.

The provision is likely to be of considerable practical significance, especially for development projects and forward-funding or forward-purchase structures in which the purchaser initially acquires only an undeveloped plot of land or a property-holding company owning such land, but where the development of the site has been firmly planned from the outset.

It will therefore lead to a significant tightening of the rules for development projects and share-deal structures involving project companies. This could materially increase the real estate transfer tax burden on development projects. In future, real estate transfer tax may be levied on the basis of the value of the completed project and not merely on the value of the undeveloped land.

It is therefore important to assess at an early stage whether, and if so which, documents (business plans, construction contracts, financing documents, shareholders’ resolutions, etc.) could serve as evidence of a pre-existing development plan.

C. Permanent continuation of reliefs for partnerships

Also relevant in practice is the removal of the time limitations (Entfristung) in section 24 of the RETT-Act.

As a result, the reliefs in sections 5 and 6 of the RETT-Act for transfers of real estate in connection with partnerships with legal capacity will continue to apply beyond the previously envisaged cut-off date of 31 December 2026.

For real estate transfer tax purposes, the concept of joint ownership for partnerships will now permanently differ from the civil-law rules that were changed by the German Act to Modernise the Law on Partnerships (Gesetz zur Modernisierung des Personengesellschaftsrechts). The legislature deliberately accepted this mismatch in order to remove the previous uncertainty about whether these important group and restructuring reliefs would continue to apply.

This means that a key real estate transfer tax privilege is preserved, especially for family-owned businesses and intra-group restructuring.

D. Conclusion

With the new section 1(3b) of the RETT-Act, the legislature has removed one of the key uncertainties surrounding the taxation of share deals. For closings on or after 3 July 2026, the taxable events in sections 1(3) and 1(3a) of the RETT-Act will generally take precedence over the transfer events in sections 1(2a) and 1(2b) of the RETT-Act, provided that the later share transfer merely implements an acquisition that has already become taxable at signing and the property portfolio remains unchanged between signing and closing.

The repeal of section 16(4a) of the RETT-Act for new cases is thus a logical consequence of the new priority given to the taxable event that occurs at signing.

At the same time, the compliance requirements are extended by bringing the property-holding company within the scope of the notification obligations. In contrast, having a longer notification period and no longer needing a separate notification for the closing step will make compliance noticeably easier in practice. Overall, this is to be welcomed and should increase legal certainty for share transfers involving companies holding property.

In the case of transactions involving development sites (especially forward deals), it is advisable to check at an early stage whether a “pre-existing property development plan” exists, in order to avoid an increased real estate transfer tax base.

Another positive development worth highlighting is the permanent continuation of the real estate transfer tax reliefs for partnerships, which will remain of considerable practical importance in many restructurings.