German Real Estate Transfer Tax (RETT): Current Case Law for Funds & SPV Reorganisations

Practical guidance for international sponsors and investors on when internal restructurings can remain RETT-neutral—and how to evidence unchanged ultimate ownership.

Introduction

Germany’s Real Estate Transfer Tax (RETT) applies not only to direct property acquisitions but also to certain transfers of interests in entities that hold German real estate. For international sponsors and investors, this makes fund and HoldCo architecture a tax-sensitive exercise.

Recent German case law sharpens the boundary: where a reorganisation is purely internal—for example inserting a master partnership, consolidating SPVs or streamlining a holding chain—and ultimate economic ownership remains unchanged, the steps can be RETT-neutral. The outcome, however, depends on careful planning and credible substance: pre/post ownership mapping, a consistent transaction rationale and aligned legal/tax documentation.

This page distils what the current framework means for cross-border platforms investing into Germany: when internal restructurings can stay tax-neutral, which scenarios are commonly used, and how to structure, document and defend your position.

Basic rule: direct property transactions

Germany’s Real Estate Transfer Tax (RETT) generally applies to direct acquisitions of German real estate (e.g., asset deals / conveyances). The tax is triggered by specified acquisition events relating to in-country property.

Share / interest transfers in entity structures

GrESt also applies to indirect acquisitions via entities that hold German real estate. Two sets of rules are central:

• Partnerships (transparent entities) – Section 1(2a) sentence 1 GrEStG. If, within ten years, at least 90 % of interests in a property-holding partnership are transferred to new partners (directly or indirectly), real estate transaction tax is generally triggered. Percentages through multi-tier chains are calculated by multiplying the interest percentages at each tier. Recent case law clarifies that purely internal chain extensions (inserting an extra partnership layer) do not create a “new partner” where ultimate economic ownership remains unchanged.

• Corporations – Section 1(2b) and Section 1(3) GrEStG. For corporations, GrESt can arise if at least 90% of the company’s shares are transferred to new shareholders within ten years (1(2b)), and—separately—on unifications or transfers leading to 90% or more in one hand (1(3)), where the partnership rules do not already apply.

Cross-border (foreign) entities

These rules apply regardless of whether intermediate or holding entities are German or foreign. What matters is that the entity to which German real estate is allocated meets the statutory thresholds (partnership interest changes, corporate share transfers / unifications).

The current ruling (BFH, 21 August 2024 – II R 16/22)

Background. The Federal Fiscal Court (BFH) considered whether inserting an additional partnership level into an existing fund/SPV chain (a “chain extension”) triggers German Real Estate Transfer Tax (RETT) under the partnership rule in Section 1(2a) sentence 1 GrEStG.

Holding. The BFH held that a purely internal chain extension does not in itself constitute a taxable event where the ultimate economic ownership remains unchanged. In other words, the newly interposed partnership is not treated as a “new partner” of the property-holding partnership within the meaning of Section 1(2a).

Reasoning. For multi-tier partnership structures, the statute requires a look-through (multiplicative) approach to percentage interests; on that basis, a mere interposition of a partnership without any change in ultimate ownership does not alter the partner base of the property-holding entity. The court explicitly distances itself from administrative guidance that had treated such steps as taxable (with relief only via Section 6), and re-affirms a substance-over-form reading for indirect changes.

Scope boundaries. The decision addresses indirect changes under Section 1(2a) (partnerships). It does not relax the treatment of direct changes at the level of the property-holding partnership, nor does it decide the corporate rules in Sections 1(2b)/1(3)—which continue to apply on their own terms. Careful fact-pattern testing remains essential.

German Real Estate Lawyer | KRONSTEYN

Conclusion for funds

Current German case law provides headroom for internal restructurings of fund and SPV chains to remain RETT-neutral where ultimate economic ownership is unchanged. For international sponsors, the practical takeaway is clear: plan steps so that form follows substance, map pre/post ownership through all tiers, and maintain consistent documentation that evidences an internal reorganisation rather than a transfer of ownership.

Contact

Considering an internal reorganisation of your German property-holding structure—or building a new platform for German assets? KRONSTEYN advises international sponsors and institutional investors on RETT risk, structuring options, implementation documents and governance alignment.

Contact Dr. Gero Kollmer to assess feasibility, design the steps and prepare the evidence package for a tax-robust execution.