Ask a tax advisor on the topic of Real estate taxation

Real estate transfer tax in a property community

August 13, 2012 | 25,00 EUR | answered by Michael Herrmann

Dear Sir or Madam,

Approximately two years ago, my wife and I (couple A) and another friendly couple (couple B) purchased a developed property. Real estate transfer tax was paid. There are no rental income as it is a core renovation project. Unfortunately, not much renovation has been done so far. In July of this year, the husband of the friendly couple (couple B) filed for insolvency. The insolvency opening does not affect this property partnership in any way. All four persons are registered by name in the land register.

Since the mortgage debts to the bank are higher than the current value of the property, the following agreement (with the insolvency administrator) should be made. Couple B transfers their share to couple A in exchange for release from liability at the financing bank. A release from liability will be provided. In the end, we (couple A) should be the sole owners of the property.

Now my question: Does this transaction be subject to real estate transfer tax? According to § 1 para. 2a GrEStG in conjunction with § 6 para. 1 GrEStG, in my opinion, real estate transfer tax should not be levied. Am I possibly correct?

Yours faithfully,

Michael Herrmann

Dear inquirer,

First of all, thank you very much for your inquiry, which I would be happy to answer based on the information provided and considering your involvement in an initial consultation. The response is given in accordance with the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.

Your assumption is correct. Since the change in the shareholders of the property community does not exceed 95%, the transaction is not taxable. It does not fall under the taxable acquisitions mentioned in § 1 (2a) GrEStG.

§ 6 GrEStG simply states that the share you held in the property would have been tax-free anyway if the acquisition fell under § 1 GrEStG.

I hope that these explanations have provided you with a sufficient overview of the situation in the context of your involvement and this initial consultation, even if you may not be able to derive a satisfactory result from it, and remain

Yours sincerely,

Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax advisor