Ask a tax advisor on the topic of Real estate taxation

Real estate transfer tax for GBR

August 25, 2014 | 30,00 EUR | answered by Anton Pernitschka

Dear expert team,

I need advice for the following situation.

Currently, I am living in a terraced house with my partner. We are not married and do not plan to be.

The house is valued at approximately 260,000 euros, with a mortgage of 140,000 euros and remaining debts of 127,000 euros, and it belongs solely to my partner.

The bank required a guarantor for the loan, which was taken on by her former partner. Due to their separation, he now wishes to transfer this guarantee to me, which the bank has agreed to. For my security, I would like to be included in the land register, or my partner would transfer half of the house to me, in exchange for me taking on the remaining liabilities.

With a 1/2 purchase or assumption of debt, there would logically be property transfer tax of 127,000 euros. If we were to separate in 20 years and one partner were to take over the house again, property transfer tax would be due again. In my opinion, this is not ideal, so I have the following thought:

My partner (A) and I (B) would establish a GbR (partnership under civil law), which has no commercial background or profit motive, as we live in the house ourselves. A would contribute her house to the GbR as an asset, and A+B would each have a 50% stake. In my view, property transfer tax would also be due for B for 50%.

If we were to separate in 20 years, B could transfer his 50% to a new partner C without triggering property transfer tax, as both A and C would own less than 95%.

Could you please answer three questions regarding property transfer tax:

1. Would property transfer tax be due upon the establishment of a GbR (by A and B) and the contribution of the house by A, if both hold 50% each?

2. Can any potential property transfer tax be avoided, for example by making cash contributions from B equal to 50% of the house value?

3. Would property transfer tax be due when transferring B's shares to C?

Thank you for your assistance!

Anton Pernitschka

Dear questioner,

In the context of an initial consultation and your fee commitment, in compliance with the regulations of this forum, I would like to answer the question.

According to § 3 No. 4 GrEStG, the acquisition of real estate by the spouse or life partner of the seller is exempt from real estate transfer tax. In your case, under these conditions, a tax exemption could be assumed, as the Federal Constitutional Court ruling of 18.07.2012 (1 Bvl 16/11) has established that life partners are equal to spouses.

However, based on the facts, A contributes the property to the A and B partnership. If the conditions of § 5 para. 2 GrEStG are met (transfer of property from a sole owner to a joint property), the tax is not levied on the share to which the seller is involved in the assets of the partnership. Under these conditions, in this case, upon the formation of the partnership, B will be subject to real estate transfer tax of 50%.

Real estate transfer tax cannot be avoided through cash contributions from B amounting to 50% of the property value if acquisition transactions are subject to § 1 GrEStG.

§ 1 para. 2a GrEStG covers the transfer of at least 95% of the shares in the assets of a real estate-owning partnership to new partners, with all acquisitions within a five-year period being combined. If taxation under this provision is not applicable, then under § 1 para. 3 GrEStG, a transaction that establishes the right to transfer at least 95% of the shares of the partnership is also subject to tax. Based on the facts, these conditions are not expected to be met.

The response was provided based on the information provided. Missing or incorrect details about the actual circumstances may affect the legal outcome.

Best regards,

Anton Pernitschka
Tax advisor