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?



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.