Under the German Real Estate Transfer Tax Act (GrEStG), both the notary who notarizes the transaction and the taxpayer are required to file a real estate transfer tax return with the tax office when shares in companies holding real estate are transferred. The deadline for filing this return is two weeks.
If the notary or the taxpayer misses the two-week deadline for filing the real estate transfer tax return, Section 16(5) of the GrEStG blocks the tax-neutral reversal of the transaction, such as the settlement of an estate. A refund of the tax is then no longer possible, even if the actual transfer is reversed. This was decided by the German Federal Fiscal Court (BFH).
No tax relief for late or incomplete filings
Three cases before the BFH concerned the transfer of GmbH shares to real estate-owning companies in Germany. This resulted in at least 95 percent of the shares being concentrated in a single hand – Section 1(3)(1) of the Real Estate Transfer Tax Act in its then-current version was satisfied, and real estate transfer tax was therefore triggered.
However, the notary’s notification and the notification from the tax debtors were received by the tax office too late. Although subsequent cancellation and repurchase agreements were intended to reverse the transaction and lead to the cancellation of the real estate transfer tax assessment, they proved ineffective. This is because § 16(5) GrEStG requires a timely and complete notification in order for the real estate transfer tax to be repealed. The unpleasant consequence for the recipients of the GmbH shares: The shares in the companies were gone again, but the real estate transfer tax remained.
Strict deadlines, no exceptions, high risks for taxpayers
This unsatisfactory outcome for taxpayers remained unchanged. The BFH took a hard line, particularly with regard to the following four points:
1. A deadline is a deadline – reinstatement does not help
Notaries are not considered “anyone” for the purposes of § 110 of the German Tax Code (AO): Reinstatement into the § 18(3) GrEStG deadline – i.e. being treated as if the deadline had not expired – was therefore ruled out. Nor were taxpayers granted reinstatement if and because they missed the § 19(3) GrEStG deadline due to a lack of knowledge regarding the tax or reporting obligation. Lack of knowledge is considered negligence.
2. No retroactive extension of the deadline after its expiration
Although § 109(1), sentence 2 AO may serve as a safety net within a current deadline when applied accordingly, once the deadline has expired, an extension for the initial filing is no longer possible, neither for notaries (§ 18) nor for taxpayers (§ 19).
3. No minimum limit
The BFH rejected a teleological interpretation (“a few days late isn’t that bad”). Requirements regarding deadlines and completeness must be taken seriously.
4. A notary’s notification can protect the taxpayer
A timely notarial notification also benefits the taxpayer under § 16(5) of the Real Estate Transfer Tax Act. This means that if the notary submits a complete notification within the deadline, the taxpayer’s own notification is no longer required. However, if the notary’s notification is submitted too late, it is of no help.
Real estate transfer tax remains: Reversal fails due to missed deadlines
A reversal – for example, because the community of heirs has changed their mind regarding the distribution of the estate – is generally unsucessful without timely notification of the real estate transfer tax transaction. For this, timely and complete notification of the original acquisition is absolutely necessary. If this is missing, the benefits of § 16(1)–(4) GrEStG do not apply – the real estate transfer tax remains, and the shares in the real estate company are lost again.
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Notaries must send the § 18 notification to the real estate transfer tax office within two weeks of notarization – in full accordance with §§ 18–20 GrEStG. To be on the safe side, purchasers should additionally file their own notification under § 19(3) GrEStG within two weeks of becoming aware of the transaction or its notarization – regardless of the notary’s notification. Those who claim “lack of knowledge” will not be granted reinstatement. If delays are foreseeable, it is essential to consider applying for a precautionary extension of the deadline under § 109 AO (as applicable). Once the deadline has passed, nothing can be done.
New deadlines planned – but only for taxpayers
The Ninth Act Amending the Tax Consultancy Act and Other Tax Provisions, currently under consideration in parliament, promises at least some relief. The two-week deadline for taxpayers under Section 19(3) of the Real Estate Transfer Tax Act is to be extended to one month.
However, an extension of the deadline for the reporting obligation under Section 18(3) GrEStG for notaries is not currently included in the draft legislation. It is to be hoped that the reporting deadlines will still be standardized and extended to one month in the course of the legislative process.
Do you have questions about deadlines and the criteria for a complete notification in Germany? Please feel free to contact us at any time. We also assist you with
- the real estate transfer tax-optimized transfer of real estate and real estate companies,
- the tax-optimized structuring of your real estate portfolio, and
- disputes regarding real estate transfer tax assessments.
Our experts are happy to advise you. Feel free to contact us anytime.
