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Property transfer tax when selling an undivided property to multiple co-owners

We are buying an undivided property with two parties. We value 400 sqm for the first party at 100% Euro/sqm and another 400 sqm for the second party at 95% (due to the eastern side and border construction by the neighbor), and 650 sqm as garden land at 10%. The property is located in Düsseldorf Angermund.

The notary pointed out to us:
If no additional real estate transfer tax is to be triggered by the transfer of the newly formed properties, the conditions of § 7 paragraph 1 of the Real Estate Transfer Tax Act must be met:
If a property owned by several co-owners is divided by the co-owners in terms of area, no tax is levied as long as the value of the partial property that the individual acquirer receives corresponds to the fraction in which he is involved in the entire property to be distributed. The fraction of the total property must therefore correspond to the value of the partial property to be acquired. The decisive factor is the fair market value of the property determined according to the Valuation Act.

Do we now have to expect higher real estate transfer tax with the current valuation or not? Thank you very much!

Ekrem Uyulur

Dear inquirer,

Regarding your above-mentioned inquiry, I would like to state the following:

Section 7 of the Real Estate Transfer Tax Act regulates the taxation in cases where a property is divided.

However, from your situation, I could only gather that an undivided property is being purchased by 2 parties. How the purchase price is determined is irrelevant for the real estate transfer tax (with the exception, for example, of purchase prices below market value).

The total purchase price is the basis for the real estate transfer tax. Each buyer will receive their own real estate transfer tax assessment. The division of the real estate transfer tax is based on the shares acquired. If two buyers each acquire half of a property, half of the real estate transfer tax will be assessed for each, regardless of whether one buyer pays more for their share and the other pays less. What is important here is the share of the total ownership agreed upon by the notary; this will also be recorded in the land register. In this case, both parties would be liable for the tax. However, it is up to you how to divide and pay the real estate transfer tax among yourselves.

If you intend to divide the property, please inform me which party holds which notarized share of the property, the size of the respective divided plots, and their respective market values. Because a division could potentially trigger additional real estate transfer tax. If no division is intended, I can answer your question by stating that no higher real estate transfer tax will be incurred than what has already arisen or will arise due to the purchase.

I hope this response has been helpful to you. I am available for further questions.

Best regards,
Tax Advisor
Ekrem Uyulur

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Ekrem Uyulur

Ekrem Uyulur

Hamburg

Nach meiner Ausbildung als Finanzbeamter habe ich über sechs Jahre praktische Erfahrungen in verschiedenen Steuerkanzleien sammeln können. Seit diesem Jahr bin ich nun selbst Steuerberater und möchte meine Kenntnisse mit Hilfesuchenden teilen.

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