REALWorld Law

Sale and purchase

Taxation of share deals

Which taxes are relevant/which transaction costs will be incurred when buying real estate via the shares in the owning company (share deal) and how are the transaction costs shared between the buyer and seller?

Angola

Angola

Typically, share deals do not trigger the payment of SISA. However, in the event the purchaser ends up holding more that 50 percent of a company holding real estate and does not prove that the main purpose of the operation is not the acquisition of the immovable properties then SISA is due.

There is normally no sharing of costs and these are normally paid by the buyer.

Argentina

Argentina

Taxes: Income tax, if a foreigner company sells shares, 35% will be withheld upon payment.

Australia

Australia

Stamp duty is payable on the transfer of shares in ‘land rich’ companies. If duty is payable, it will be levied on the value of the underlying land (and, in certain states, the goods) of the company. The rates of duty are the same as a direct sale of the land (ie up to 7 percent). As is the case in respect of asset deals, a transfer of shares in ‘land rich’ companies to a foreign person may attract the foreign purchaser surcharge duty (mentioned above) where the majority of the assets of the company consist of residential real estate.

Duty is generally payable by the purchaser, but in some states, both parties are jointly and severally liable for the duty.

Each jurisdiction differs as to the threshold tests for what constitutes a ‘land rich’ company, the types of transactions caught by the stamp duty legislation and the applicable rates of duty.

Similar provisions apply in relation to the acquisition of beneficial interests in trusts (a trust is a form of ownership where a nominal owner holds property on trust for, ie on behalf of, the true or ‘beneficial’ owner and the beneficial owner’s interest can be sold without the nominal ownership of the asset changing). As is the case in respect of asset deals, a transfer of units in ‘land rich’ trusts to a foreign person may attract the foreign purchaser surcharge duty (mentioned above) where the majority of the assets of the trust consist of residential real estate. 

Belgium

Belgium

In principle, share purchases are not subject to any indirect taxation, whatever the assets held by the company. Anti-abuse rules should not, as a general rule, affect share purchases. Exceptionally, certain share deal structures could possibly fall within the scope of these measures.

The only costs include the fees of professional advisors. There are no registration duties.

In principle, both parties pay their own costs.

Bosnia-Herzegovina

Bosnia-Herzegovina

Transaction costs are normally paid by the buyer.

The buyer usually pays the notary's fee and the agency fees, but this is subject to agreement between the parties. These costs are usually around 5% of the estimated value of the property plus the additional fees for the notary, which also depend on the value of the property. The property value is determined by the relevant Tax Administration.

The Constitutional Court of Federation of Bosnia and Herzegovina rendered a decision no. U-22/16 on 6 March 2019 deciding that the provisions of the Law on Registration of Companies of FBiH, the Act on Rights in Rem, the Act on Land Registries in FBiH, the Family Law of FBiH, and the Act on Enforcement Procedure are not in accordance with the Constitution of FBiH. This will eliminate the need that the documents related to the transfer of real estate, incorporation acts etc will be required in the form of a notarial deed.

Brazil

Brazil

Capital gain is due if an asset or right is transferred with a profit. That is, when the sale price exceeds the price of the acquisition, as explained above. Buying real estate via an acquisition of shares may require the payment of capital gains tax.

However, no real estate transfer tax (ITBI), mentioned in the previous section, will be due on the transfer of shares, even if the entity has real estate purposes.

Canada

Canada

GST/HST is not payable on the sale of shares of a company. Furthermore, property transfer tax is not payable on the sale of shares of a company, as there is no change in registered ownership in the land registry. For this reason, it is common for real estate to be held in the name of a bare trustee company and for the acquisition of real estate to be structured as a transfer of beneficial ownership of the property and the acquisition of the shares of a bare trustee.

The sale of shares of a company can also trigger an obligation on the part of the seller to pay taxes on the capital gain or income earned by the seller in respect of the sale share.

China

China

The following taxes will be incurred in share deals:

  • Stamp Duty – Stamp Duty (SD) is levied on certain dutiable documents executed or used in China, including share sale and purchase agreements. SD is calculated at a fixed rate according to the contract amounts. The rates generally range from 0.01% to 0.003%, depending on the type of document.
  • Enterprise Income Tax – The rate is 25% of net profit (consolidated with the enterprise’s annual profit) payable by the seller of the real estate. Foreign enterprises not maintaining establishments in China are taxable on their income and gain on a gross withholding basis at the rate of 10%.
  • Withholding Tax – Where an overseas company sells a property holding company to another FIE, withholding tax will be payable.
Colombia

Colombia

No text yet.

Croatia

Croatia

Fees include notarial and registration costs. The notarial fee is much higher than that for an asset deal and depends on the value of the deal. The transfer of shares is not subject to tax.

The registration fee payable to the court is around HRK1,300.

Czech Republic

Czech Republic

The costs of the transaction depend on the specific details, including the type of company (limited liability company, joint stock company etc), its size, the value of its assets etc.

Costs include:

  • Legal expenses
  • Notarial expenses
  • Fee for the registration of changes in the commercial register where applicable

Each party usually bears its own legal costs. Notarial expenses and registration expenses are often split by agreement of the parties.

Denmark

Denmark

When buying shares in the owning company the legal owner of the real estate remains the same, and the transaction is not taxed as a real estate transaction, although tax may be payable on the transfer of shares.

France

France

Indirect transfers of real estate, through the transfer of a company holding real estate assets, are subject to transfer tax at the rate of 5% of the price paid for the shares. Transfer tax applies to all companies, irrespective of their legal form, where the market value of the real estate accounts for more than 50% of the total value of the company's assets.

The basis for the assessment of transfer tax is the price of the shares, after the deduction of the company's debt.

Germany

Germany

The most important relevant tax is the property transfer tax. Most sale and purchase agreements stipulate that this tax is paid by the buyer.

In share deals, there are strategies available to avoid property transfer tax if the seller remains as a shareholder in the company, holding a stake of more than currently 5 %, for more than five years (note that this requirement must be observed from a genuine economic perspective, not just formally). If this requirement is not met, the rate of property transfer tax lies between 3.5% and 6.5% of the purchase price, depending on the German federal state.

A reform of the property transfer tax came into effect on 1 July 2021. This reform concerns especially share deals in real estate transactions. According to the new law, property transfer tax can only be avoided if less than 90%, instead of 95%, of the shares or interest in corporations or partnerships are transferred and the holding periods for the seller for his minority stake or interest of more than 10% has been extended to 10 years, instead of 5 years.

The rules applicable to corporations will be aligned to the rules that currently apply to partnerships.

Transaction costs include:

  • the notary's fees, which are fixed by statute;
  • property transfer tax;
  • legal costs for registration/deletion of land charges; and
  • the fees of the lawyers instructed to carry out due diligence and draft the sale and purchase agreement.

Notarization and registration costs are quite substantial.

Normally each party pays its own legal fees. Property transfer tax, notarization fees and the legal costs relating to the implementation of the sale and purchase agreement are paid by the buyer, with the exception of any legal costs incurred in connection with the discharge of existing encumbrances by the seller.

Hong Kong, SAR

Hong Kong, SAR

With effect from 1 August 2021, the sale or purchase of any Hong Kong stock is charged at a rate which varies with the amount or value of the consideration as follows (although an exemption may apply to a transfer of Hong Kong stock between companies with at least a 90% common shareholding if certain conditions are satisfied):

Nature of document Rate
Contract note for sale or purchase of any Hong Kong stock 0.1% of the amount of the price or of its value on every sold note and every bought note
Transfer operating as a voluntary disposition between individuals HK$5 + 0.2% of the value of the stock
Transfer of any other kind HK$5

If the property is to be let and rent is collected then property tax is payable. The exact amount payable is calculated at a percentage of the 'Net Assessable Value'. This percentage has been set at 15% from 2008/09 onwards. The Net Assessable Value is calculated by taking the annual rental income less irrecoverable rent, rates and a statutory allowance for repairs and outgoings.

Corporations can elect not to pay property tax but profits tax instead (at 16.5%) on net profits derived from rental income.

Hungary

Hungary

In the case of a share purchase, the acquisition of 75% or more of the shares (including shares held by close relatives, related parties etc) in a company holding Hungarian real property is subject to transfer tax provided that the balance sheet value of the company's Hungarian real property (or properties) exceeds 75% of the company's total balance sheet value (subject to certain adjustments). In such cases the general transfer tax rate, ie 4%, applies. Nevertheless, (i) a reduced rate of 2% applies to the value above HUF 1 billion, and the transfer tax payable cannot exceed HUF 200 million per real estate asset; (ii) if the acquirer is a REIT (real estate investment company), a reduced 2% rate applies (regardless of value).

If no adjustment applies as prescribed by the Duties Act, the tax base is the market value of the real property (or properties) owned by the acquired entity (or entities) in proportion to the shares held by the acquirer.

The transfer of shares is exempt from VAT.

Minor stamp duty and publication fees are payable by the buyer to the Court of Registration. Legal and notarial fees (usually to be paid as agreed by the parties) may also be incurred.

Ireland

Ireland

Subject to certain exclusions, stamp duty at a rate of 6% is payable on the purchase of shares or units (deriving their value or the greater part of their value from non-residential property in Ireland) in a company, partnership or Irish real estate funds.  Transfers of shares or units in a company, partnership or Irish real estate fund that hold residential property will continue to be charged at 1% on the first €1 million and 2% on any balance over €1 million.

Capital gains tax (CGT) can arise on a disposal of shares if the selling shareholder is Irish tax resident or the shares in the property‑holding company derive their value or the greater part of their value from Irish real estate. In addition, where shares derive their value or the greater part of their value from Irish real estate and the consideration exceeds €500,000, a withholding tax of 15% is applied unless the seller presents a Capital Gains Tax Clearance Certificate (CG50) to the buyer. The capital gains tax relief mentioned above does not extend to the disposal of shares in a company which derives its value or the greater part of its value from Irish real estate.

The Revenue Commissioners will issue a CG50 if they are satisfied that (i) the seller is resident in the state, (ii) CGT is not payable or (iii) CGT has already been paid by the seller.

Italy

Italy

Registration tax of €200 applies. Financial transaction tax (Tobin Tax) applies in the case of a purchase of shares in an Italian resident joint stock company, even if the purchaser and the seller are not Italian resident. The tax is levied at a rate of 0.2% on the agreed price (no Tobin Tax applies in case of transfer of quotas of an SRL, therefore a limited liability company).

These costs are usually paid by the buyer.

Japan

Japan

For share deals, most of the relevant taxes applicable to asset deals are not imposed. The relevant one for such deals are as follows:

Brokerage fee

When a broker assists a buyer or a seller to execute an SPA, the buyer or the seller must pay respectively a brokerage fee.  In Japan, it is not unusual for one broker to receive a brokerage fee from both the seller and the buyer.

Netherlands

Netherlands

Real estate transfer tax can be payable in relation to both asset deals and share deals. Real estate share deals are situations where the company being acquired qualifies as a 'real estate company' ie, if at least 50% of its assets consist of real estate (either in the Netherlands or abroad) and that real estate is mainly (70% or more) instrumental in the trading of and/or development of real estate, and 30% of those assets are located in the Netherlands. The rate of the real estate transfer tax is 10.4%.

The real estate transfer tax is usually paid by the buyer. An exemption from real estate transfer tax can sometimes be obtained.

New Zealand

New Zealand

Shares can be held on revenue account (ie taxable) or on capital account (ie non-taxable). Broadly, shares are held on revenue account where they are acquired with a purpose of disposal, the person is in the business of dealing in shares or acquires and disposes of the shares in the course of carrying on or carrying out a profit-making undertaking or scheme. If shares are held on revenue account, then an amount a person derives from any future sale would be subject to New Zealand income tax. Alternatively, any amount derived from the sale of shares held on capital account should not be subject to New Zealand income tax.

New Zealand also has specific tax anti-avoidance rules that would allow New Zealand's Inland Revenue to challenge transactions that have been structured as a share sale, rather than an asset sale, to defeat the intent and application of New Zealand's land-taxing provisions.

Transaction costs incurred (eg advisor costs) in acquiring shares held on revenue account should be income tax deductible but would not be income tax deductible if the shares acquired are held on capital account. Ordinarily, buyers and sellers will cover their own transaction costs, unless the parties agree otherwise. This will be a commercial decision.

Nigeria

Nigeria

Section 2 (2) of the Finance Act, 2021 provides that gains accruing to a person on disposal of shares in any Nigerian company registered under CAMA (irrespective of the real estate asset holding of the company) shall be subject to CGT at 10% of the gains. The exceptions to this rule are:

  • Where the proceeds from such disposal are reinvested in the same year of assessment in the acquisition of shares in the same or other Nigerian Companies (Note: CGT will apply to the portion of the gains not invested).
  • The proceeds of the share transfer is less than N100 million in any 12 consecutive months, provided the person making the disposals shall render appropriate returns to the FIRS on an annual basis.
  • The shares are transferred between an approved borrower and lender in a regulated Securities Lending Transaction as defined in the Companies Income Tax Act.

Furthermore, all documents relating to the transfer of stocks and shares are exempt from the payment of Stamp duties, as provided by the Stamp Duties Act (item 13 of the General Exemption Schedule). In practice, only a nominal stamp duty of NGN 500 is payable as stamping costs for a share transfer agreement in the event that the buyer is required to have the document stamped. It is also noteworthy that the Finance Act 2021 specifically excludes taxable persons from paying value added tax on supplies made as a consequence of the person selling the whole or part of its business. However, this exemption does not apply to companies engaged in upstream petroleum operations as described in the Petroleum Industry Act and Petroleum Profits Tax Act.

Norway

Norway

When buying real estate in Norway via a share deal the agency fees are usually between 1% and 3% of the purchase price. These are normally paid by the seller unless otherwise agreed. In addition, there is a charge for registering any mortgage deeds which is paid by the buyer. In the case of other costs, such as legal fees, each party normally pays its own expenses.

No stamp duty applies to share deals.

Specific tax rules apply to the taxation of limited liability companies.

Poland

Poland

If shares are transferred to the buyer, a tax on civil law transactions at 1 percent is due, calculated on the basis of the market value of the shares. In most cases, this is the purchase price but if this does not correspond with the market value, the tax authority will request a correction and may finally assess the value using an authorized expert's opinion.

Transaction costs are normally 1 percent of the purchase price, including the court fee and notarial fee of up to PLN 10,000 plus 23 percent VAT, but not including potential legal costs.

Costs are subject to negotiation and agreement between the buyer and seller. Normally, the buyer pays the transaction costs and according to the law the tax on civil transactions.

Portugal

Portugal

In the case of a share deal, as of 1 January 2021, IMT applies to the purchase of an equity position both in a private limited liability company (Lda.) and in a corporation (S.A.) which holds real estate assets located in Portugal if the following requirements are cumulatively met:

  1. The asset value of the company transferred is, directly or indirectly, composed by more than 50% of real estate assets located in Portugal;
  2. The real estate assets are not directly allocated to an activity of agricultural, industrial or commercial nature, unless the activity is of purchase and sale of real estate property; and
  3. As result of the acquisition (or other corporate events) one of the shareholders retains at least 75% of the share capital of the target entity (or the number of shareholders is reduced to two persons married or in a non-marital partnership).

Until December 31, 2020, IMT could only apply with respect to private limited liability companies, but this tax applied in all cases resulting in a transfer of at least 75% of the share capital of the company.

If the purchase of shares involves a privately placed closed-end Real Estate Investment Funds, the transaction is subject to IMT if after the acquisition the acquirer holds 75% or more of the units in the fund.

The buyer is responsible for the assessment and payment of IMT, as well as VAT if applicable. IMT must be paid before the deed is executed and the notary is obliged to confirm that it has been paid.

Stamp duty, where applicable, is paid by the buyer (who normally also pays the notary's fees). The buyer must present the payment proof to the notary at the moment of the transfer signature. The tax is paid through a document issued by the tax authority (the buyer can issue the document in the tax authority website or request it in a tax authority service).

In addition, the acquisition of immovable property by means of reimbursement in kind of participation units on the liquidation of a privately placed closed-end real estate investment fund, is subject to IMT.

IMT also applies to a transfer of immovable property arising from a merger of privately placed closed-end real estate investment funds.

Romania

Romania

Romania does not levy any stamp or transfer tax on the indirect transfer of real estate (ie share deals). Certain fees (at a level of approx. €200) must be paid to register the transfer of the shares with the Commercial Registry.

Slovak Republic

Slovak Republic

Acquisition of real estate in Slovakia entails the following costs:

  • No taxes will be incurred by a buyer purchasing real estate in Slovakia via a share deal
  • Fees for legal advice
  • Notary's fees for the verification of signatures on the contract
  • Fees for registration in the Commercial Register and Cadastral Registry
  • Agency fees (depending on the value of the real estate)
  • Possible fees for the identification of the plot, procurement, and verification of the plans etc (these may be agreed as part of the legal or agency fees)

The buyer usually bears the costs, unless otherwise agreed by the parties. However, both parties are liable for tax payments as far as the tax authority is concerned. Usually, the buyer pays the notary's fee, the registration fee and the agency fees, but this is subject to agreement between the parties.

Spain

Spain

The transfer of shares is exempt from VAT and transfer tax. Nevertheless, transfer tax/VAT can be incurred on the transfer of shares in companies, when the transfer of the shares is made with the purpose of avoiding the payment of the tax that would have been paid in case of transfer of the real estate. The law considers there are tax avoidance reasons where 50% or more of the assets consist, directly or indirectly, of real estate located in Spain and are not used for business activities, and, as a result of the transfer, the buyer acquires control over the company (ie more than a 50% stake in its share capital) or increases its stake once it has obtained control.

Transfer tax is payable at a rate ranging between 6% and 11% of the value of the underlying real estate assets at the time of the transfer.

Transaction costs include notarial fees, requisition fees, legal and other fees relating to due diligence, and agency fees.

Sweden

Sweden

No transfer tax is payable on the transfer of shares. Other costs may include legal and financial advice, and estate agency fees. Estate agents normally work on a commission basis which generally varies between 0.5 percent and 5 percent of the agreed purchase price, depending on the type of real estate and the size of transaction. The seller normally pays the estate agent. Other costs are generally met by the buyer.

Thailand

Thailand

Stamp duty should be paid at the rate of 0.1% on the greater value of the paid up registered value of shares or the sales proceeds value resulting from the sale of the shares; and the buyer of the shares will have to deduct withholding tax at the rate of 15% unless otherwise exempted by a double-taxation agreement.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

At the date of publication, none.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

There will be nominal fees payable to the relevant company regulator to register the transfer of shares, for example, the Dubai Economic Department or any free zone authority.

Dubai Land Department (DLD) require changes in shareholding of real-estate-owning companies to be informed to them and a proportionate transfer fee will be applied. Failure to inform the DLD can result in a fine.

Care is required when entering into a share deal because the location of the land will be all important in determining what nationalities can own shares in the owning company. For example, a local LLC company which has 'local' shareholders and which owns land in an area not designated for foreign ownership cannot then have some shares held by a 'foreigner' as it will no longer be entitled to own the land.

UK - England and Wales UK - England and Wales

UK - England and Wales

Generally, stamp duty at a rate of 0.5% (of the consideration given for the shares) is payable if the company is a UK company. No stamp duty is normally payable on the sale and purchase of shares in non-UK companies, unless it is a non-UK company that has a share register in the UK.

There is no legal requirement as to who pays stamp duty but, in practice, it is almost always paid by the buyer.

UK - Scotland

UK - Scotland

Generally, stamp duty at a rate of 0.5% (of the consideration given for the shares) is payable if the company is a UK company. No stamp duty is normally payable on the sale and purchase of shares in non-UK companies, unless it is a non-UK company that has a share register in the UK.

There is no legal requirement as to who pays stamp duty but, in practice, it is almost always payable by the buyer.

United States

United States

The answer to this question varies from state to state. State and other local laws of the property in question will determine whether transfer taxes and other taxes are payable in a share deal. Typically, a change in control of an owning company will trigger the payment of city, county and state transfer taxes and also a reassessment of property taxes.

In most instances, the applicable state, or the county in which the property is situated, has established customs for:

  • allocation of escrow fees;
  • title insurance and survey costs; and
  • city, county and state transfer taxes.

The SPA should describe the allocation of those costs between the parties.

Zimbabwe

Zimbabwe

Capital gains tax is the only statutory cost incurred when buying real estate via the shares of the owning company. This is a cost which is borne by the seller.

In the event that contracts are drawn up with respect to the purchase of the shares, the additional cost would be the legal fees incurred for the drafting of the agreement. This cost will be subject to agreement between the parties.