According to the government's explanatory memorandum to the Growth Opportunities Act, the tax exemptions for property transfers involving partnerships will expire when the MoPeG comes into force on 1 January 2024. It is not yet clear whether and to what extent there will be a corresponding new regulation.

Background

Since 1940, the German Real Estate Transfer Tax Act (GrEStG) has contained a number of tax exemptions for the transfer of real estate involving a joint ownership. To date, these tax exemptions have also been extended to all partnerships with legal capacity, such as general partnerships (oHG), limited partnerships (KG), GmbH & Co. KG and the partnership under civil law (GbR). The following transfer transactions in particular are currently exempt from real estate transfer tax:

Transfer of a property from one or more joint owners to the joint owner (Section 5 GrEStG)
Transfer of a property from a joint owner to one or more joint owners (Section 6 (1), (2) GrEStG)
Transfer of a plot of land from one joint owner to another joint owner if the joint owners are identical (Section 6 (3) GrEStG)
Partial division of a plot of land belonging to a joint owner (§ 7 para. 2 GrEStG)
These tax exemptions also require that the relevant ownership structure - depending on when the transfer took place - does not change over a period of 5 or 10 years (15 years in special cases).

Modernisation of partnership law

The Act on the Modernisation of Partnership Law (MoPeG) of 10.8.2021, which comes into force on 1.1.2024, will abandon the concept of Gesamthand in company law. In particular, the regulations on the GbR will be adapted to the case law of the Federal Court of Justice (BGH). Since 2001, the BGH had already recognised the GbR as having legal capacity and, as a result, also as capable of being entered in the land register. The law now also clarifies that a GbR with legal capacity has its own company assets (§ 713 BGB-new). The joint and several liability of the partners as the previous owners of the assets is therefore no longer necessary.

The explanatory memorandum to the MoPeG clearly states the income tax implications of the new regulations - they are not intended to have any income tax implications. Insofar as the term "Gesamthandsvermögen" is used in the tax laws, this is now to be understood as the "assets of the company" (see BT-Drs. 19/27635, p. 107). Accordingly, the government draft of the Growth Opportunities Act mainly provides for such editorial changes in the tax laws.

Effects on real estate transfer tax

In the area of real estate transfer tax, however, doubts have arisen as to the impact of the MoPeG's move away from joint ownership on the tax exemptions for property transfers involving partnerships pursuant to sections 5, 6 and 7 (2) GrEStG.  

According to the government draft of 30 August 2023, the Growth Opportunities Act is now intended to clarify that the entry into force of the MoPeG alone will not result in a breach of the subsequent retention periods under sections 5, 6 and 7 GrEStG that have not yet expired on 1 January 2024 (section 23 (25) GrEStG-E).  The subsequent retention periods continue to run and are violated if the share in the company's assets is reduced within the period.

However, it is unclear whether the tax exemptions of sections 5, 6 and 7 para. 2 GrEStG will continue to apply to transfer transactions between partnerships and their shareholders from 1 January 2024. According to the explanatory memorandum to the government draft of the Growth Opportunities Act, discussions between the federal and state governments on this issue have not yet been finalised. However, the government draft assumes that these tax exemptions will no longer apply once the MoPeG comes into force and that their regulatory scope will "come to nothing."

According to a discussion draft of the Federal Ministry of Finance for a Real Estate Transfer Tax Amendment Act, a comparable regulation is to be retained, which would not only cover property transfers to and from partnerships, but also those to and from corporations. However, it is currently still completely unclear whether the majority of the federal states would follow this proposal. This is because the current GrEStG does not yet contain a comparable regulation for corporations.

A recommendation by the committees of the Bundesrat on the draft of the Minimum Taxation Act of 19 September 2023 currently provides for a clarification in Section 39 (2) no. 2 of the German Fiscal Code that partnerships with legal capacity continue to be considered joint ownership for the purposes of income taxation and real estate transfer tax. This would maintain the scope of application of the previous tax exemptions.

Which solution will ultimately receive the necessary majorities in the Bundestag and Bundesrat is currently still completely open due to these different initiatives.

Conclusion and practical advice

The entry into force of the MoPeG raises a major question mark over the future of the tax exemption for property transfers involving partnerships. According to the government draft of the Growth Opportunities Act, the entry into force of the MoPeG on 1 January 2024 should have no impact on transfers that were and will be carried out by 31 December 2023. However, the current retention periods must still be observed.

For transfers from 1 January 2024, it is not yet clear which legal regulations will apply. It is unlikely that a fundamental reform of real estate transfer tax will be implemented by the end of the year. There could therefore be a period of legal uncertainty from 1 January 2024 until a new regulation comes into force. The further legislative process should be monitored closely.

If properties are to be transferred to, from or between partnerships in the foreseeable future, we recommend checking whether these transfers should still be carried out in 2023.