Berlin – Berlin accounts for an overwhelming proportion of real estate transactions in Germany that are designed in such a way that the buyer can prevent the payment of the real estate transfer tax. That comes from the answer of the Federal Ministry of the Interior, for Building and Home Affairs (BMI) to a question of the Berlin Bundestag member Pascal Meiser (left).
According to this, the proportion of so-called share deals, in which the real estate transfer tax can be avoided, is up to 15 percent per year nationwide in the last six years, in Berlin, however, up to 31 percent. In share deals, shares in real estate companies change hands. Investors can avoid the tax if they fall below a certain upper limit of the shares when buying.
Until. June 2021 was limited to 95 percent of the shares. Anyone who acquired fewer shares in a purchase did not have to pay real estate transfer tax. The real estate transfer tax is levied by the federal states. The tax rate is between 3.5 and 6.5 percent of the purchase price of a property, in Berlin it is 6 percent. According to the federal government, it is not possible to say how much money the tax authorities are escaping through share deals. The reason: the federal states do not keep statistics on tax-free transactions. But the amount should be very high. Before the amendment to the land transfer tax law, which came into force on July 1 of this year, the federal government spoke of “significant tax reductions” that had arisen in high-priced transactions under the old legal situation.
Vonovia does not prevent changes in the law
With the amendment of the Land Transfer Tax Act, the security for share deals was reduced from 95 to 90 percent, which is intended to “contain” share deals, but this does not prevent them. For example, Vonovia are dying in connection with the takeover of Deutsche Wohnen that they want to acquire less than 90 percent of the shares. This enables them to avoid paying billions in real estate transfer tax. By contrast, if you buy your own home or apartment in Berlin as owner-occupiers, you usually have no way of avoiding paying real estate transfer tax. If the property costs 500,000 euros, a real estate transfer tax of six percent of the purchase price is 30,000 euros tax.
The Bundestag member Pascal Meiser (left) criticizes the tax loophole. “For years, the public sector has lost billions of euros in tax revenues from share deals that are urgently needed elsewhere,” he says. “It shouldn’t be the case that the real estate transfer tax hits in full when buying a small home, while large companies use tax tricks to avoid paying this tax.”
According to the BMI’s response to Meiser’s request in Germany, a total of 880,700 apartments were sold in 686 recorded transactions from 2015 to 2020. 152,000 of these were in Berlin, which changed hands in 181 transactions. According to the BMI, the share of share deals nationwide in 2015 was 15 percent (Berlin: 31 percent), in 2016 it was 11 percent (Berlin: 20 percent), in 2017 it was 9 percent (Berlin: 23 percent), and in 2018 it was 10 percent ( Berlin: 25 percent), 2019 to 9 percent (Berlin: 14 percent) and 2020 to 8 percent (Berlin: 7 percent).
Future traffic light coalition is aiming for further changes
The BMI relies on data from the Federal Institute for Building, Urban and Spatial Research. Small transactions with 100 to 800 apartments and transactions with more than 800 apartments were recorded. According to the Federal Ministry of the Interior, for large transactions with more than 800 apartments, “a complete record of the transaction process can be assumed”. In the case of smaller sales, in particular of the order of 100 to 500 apartments, “only partial coverage can be expected due to the limited information available”. The actual volume of sales is likely to be even greater.
According to the Senate Department for Finance, the amount of tax losses caused by share deals in Berlin “cannot be reliably estimated”, as the spokesman for the authorities, Alexis Demos, announced. According to Demos, the tightening of the law on July 1, 2021 will “add to the fact that the under-tax revenue will decrease”. But the future traffic light coalition will not be satisfied with that. In the exploratory paper, the SPD, Greens and FDP agreed to facilitate the acquisition of owner-occupied residential property, which is to be counter-financed by “closing tax loopholes when buying real estate from corporations (share deals)”. However, the exact formulation in the coalition agreement is still pending.