Federal Fiscal Court ruling: The real estate transfer tax group clause in section 6a of the Real Estate Transfer Tax Act requires a controlling enterprise

Recent developments in RETT

RETT is currently a focus of legislative activity. The “Draft of a Ninth Act Amending the Tax Consultancy Act and Amending Further Fiscal Provisions” [Entwurf eines Neunten Gesetzes zur Änderung des Steuerberatungsgesetzes und zur Änderung weiterer steuerrechtlicher Vorschriften] had already been in the legislative process since August 2025. After some back and forth, the Act was passed by the legislature in mid-June and promulgated on 2 July 2026 in the Federal Law Gazette [Bundesgesetzblatt–BGBl.] (Federal Law Gazette 2026 I no. 197). Alongside numerous further sets of provisions – such as the increase in the “minimum multiplier” (section 16(4) of the Trade Tax Act [Gewerbesteuergesetz–GewStG]) – the Act contains important changes in the area of RETT.

For one thing, the notification requirement of taxpayers has now been set uniformly at one month (section 19(3) of the RETT Act, as amended). Under section 23(28), this new provision is “…to be applied for the first time to acquisition transactions that are realised after the date of the day of promulgation of the amending Act [2 July 2026]”. In addition, the “joint-ownership fiction” of section 24 (see also section 2a of the Inheritance Tax Act [Erbschaftsteuergesetz–ErbStG] and section 39(2) no. 2 sentence 2 of the Fiscal Code [Abgabenordnung–AO]) has been “made permanent”, so that it can permanently ensure the application of the provisions of sections 5 and 6. An addition was also made to subsection 2 of section 8 containing the provision on the tax base for RETT.

In practical terms, however, the most important change is likely to be the reversal of the ranking  of section 1(3) and (3a) on the one hand and section 1(2a) and (2b) on the other. Section 1(3) previously determined its own subsidiarity itself in the addition “…insofar as taxation under subsections 2a and 2b does not come into consideration …”. This subsidiarity will cease to apply in future, just as section 16(4a) will. As a result, in future the “closing triggering events” of section 1(2a) and (2b) are to cease to apply where section 1(3) and (3a) were previously applied. In this respect too, the general application rule of section 23(28) applies, with section 23(29) intervening as a “lex specialis” for already pending cases.

In addition, disruption from an unexpected quarter has entered the provisions that trigger section 1(3): in the Nova Iberomoldes case, the European Court of Justice (judgement of 4 Jun 2026, C-837/24) ruled on a similar Portuguese provision and its relationship to the Capital Duty Directive. The effects on German RETT law, which have so far not prompted the Federal Fiscal Court to make a submission to the European Court of Justice, remain to be seen (e.g. Federal Fiscal Court judgement of 25 Sep 2024, II R 36/21, Federal Tax Gazette II 2025, p. 324).

The “tax relief for restructurings within a group” in section 6a of the RETT Act

Meanwhile, the discussion surrounding section 6a (“tax relief for restructurings within a group”) has become somewhat quieter. The battles over the state-aid issue (Art. 107 of the Treaty on the Functioning of the European Union) related to section 6a of the Real Estate Transfer Tax Act have been concluded (European Court of Justice judgement of 19 Dec 2018, C-374/17, “A-Brauerei”, EU:C:2018:1024). Although the provision does operate selectively, because it favours certain companies for RETT arising on a change of legal entity, this is justified by the nature and structure of the RETT system (Federal Fiscal Court judgement of 22 Aug 2019, II R 17/19 (II R 58/14), Federal Tax Gazette II 2020, p. 348, para. 15).

Likewise, the tax authorities accepted the extensive Federal Fiscal Court case law on the question of the pre-retention and post-retention period of section 6a sentence 4 in their Circular of the Supreme Tax Authorities of the Federal States dated 25 May 2023 (Federal Tax Gazette I 2023, p. 995). As a result, neither period need be observed insofar as this is not possible under reorganisation law. In the case of the pre-retention period, this is the case with regard to the newly formed company in cases of division (section 123 of the Reorganisation Act [Umwandlungsgesetz–UmwG]) by way of new formation (Circular of 25 May 2023, Federal Tax Gazette I 2023, p. 995, at 3.2.2.1). In the case of the post-retention period, this applies with regard to the transferring company in cases of merger (section 2) and split-up (section 123(1)), by way of absorption and new formation respectively (Circular of 25 May 2023, Federal Tax Gazette I 2023, p. 995, at 3.2.2.2). By contrast, the position is different where a “shelf company” is used (Federal Fiscal Court judgement of 8 Oct 2025, II R 33/23).

The question of the “controlling enterprise” and of the “dependent companies” as defined by section 6a sentence 3 of the RETT Act, by contrast, is dealt with in section 3 of the Circular of the Supreme Tax Authorities of the Federal States of 25 May 2023 (Federal Tax Gazette I 2023, p. 995) – section 6a applies to all legal entities as defined by the RETT Act that are engaged in business. The controlling enterprise need not be a taxpayer as defined by section 2 of the VAT Act [Umsatzsteuergesetz–UStG] (Federal Fiscal Court judgement of 21 Aug 2019, II R 19/19 (II R 63/14), Federal Tax Gazette II 2020, p. 337). The characteristic of economic activity must, however, be present without interruption within the five-year pre-retention and post-retention periods (Circular of 25 May 2023, Federal Tax Gazette I 2023, p. 995, at 3.1), even where the pre-retention or post-retention period otherwise need not be observed in the cases mentioned above (Circular of 25 May 2023, Federal Tax Gazette I 2023, p. 995, at 3.2.2.1 and 3.2.2.2).

Which enterprise is the “controlling enterprise” and which company is the “dependent company” as defined by section 6a of the RETT Act is determined by the particular reorganisation transaction for which the tax is not to be levied under section 6a sentence 1. In the case of multi-tier shareholdings,  it is irrelevant whether the controlling enterprise is itself dependent on one or more further enterprises (Federal Fiscal Court judgement of 28 Sep 2022, II R 13/20, Federal Tax Gazette II 2023, p. 666).

Particular questions concerning the “controlling enterprise” in sentences 3 and 4 of section 6a of the RETT Act

The Federal Fiscal Court had addressed the question of the “controlling enterprise” in its judgement of 21 May 2025 (II R 56/22, Federal Tax Gazette II 2026, p. 76) in a case concerning section 1(3) no. 4, which reads: “the direct or indirect transfer of at least 90 per cent of the shares in the company to another person, where no transaction under the law of obligations as defined by number 3 preceded it”. According to this judgement, a group of natural persons who are not combined in the legal form of a partnership or a corporation is not a legal entity in the civil-law and RETT sense and cannot be a controlling enterprise as defined by sentences 3 and 4 of section 6a.

The Federal Fiscal Court has now ruled on a case concerning section 1(3) no. 1, which reads: “a legal transaction that establishes a claim to the transfer of one or more shares in the company, where, as a result of the transfer, at least 90 per cent of the shares in the company would be combined, directly or indirectly, in the hands of the acquirer or in the hands of controlling and dependent enterprises or dependent persons or in the hands of dependent enterprises or dependent persons alone”. In the year at issue of 2017, of the new judgement (II R 2/23), the thresholds required for tax to be levied, including those in section 1(3), still stood at 95 per cent.

The Federal Fiscal Court has affirmed the procedural requirements that apply to section 6a – the decision on tax relief under section 6a is taken in the RETT assessment notice (e.g. Federal Fiscal Court judgement of 25 Sep 2024, II R 2/22, Federal Tax Gazette II 2025, p. 253). But if a separate assessment of the tax bases is to be carried out under section 17(2) and (3), whether the requirements for tax relief or exemption have been met must already have been determined separately in the assessment notice (e.g. Federal Fiscal Court judgement of 16 Mar 2022, II R 24/20, para. 16).

The “controlling enterprise” as defined by sentences 3 and 4 of section 6a need not be organised in any particular legal form. However, a group of natural persons who have not combined in the legal form of a partnership or a corporation is not a legal entity in the civil-law and RETT sense. Consequently, the capacity to be a “controlling enterprise” was lacking in the case at issue, too. It is true that, in principle, no particular form would be required to conclude an agreement concerning a partnership under civil law [Gesellschaft bürgerlichen Rechts]. What would be required, however, is the intention on the part of the partners to be legally bound – including by implication – to join together for a common purpose in respect of their shareholdings in such a company, together with the far-reaching legal consequences associated with this (para. 27). The community of heirs in the case at issue could indeed be a controlling enterprise (see also Circular of 25 May 2023, Federal Tax Gazette I 2023, p. 995, at 3.1); however, this community did not hold the required 95 per cent interest in the dependent company.