Real estate transfer tax after the CJEU’s Nova Iberomoldes judgment

Nova Iberomoldes: The CJEU’s benchmarks for real estate transfer tax

The underlying case was unspectacular and routine. In 2019, a Portuguese holding company incorporated a new stock corporation and fully paid in its share capital by way of contributions in kind. The assets contributed were shareholdings in other companies, one of which owned real estate in Portugal. In return, the contributing company received all shares in the newly incorporated company.

The tax authorities nevertheless assessed IMT, the Portuguese real estate transfer tax. It is also triggered where, as a result of a share acquisition, a shareholder consolidates at least 75 percent of the capital of a real estate-owning company. The tax base is then not the value of the shares, but the tax reference value of the real estate (see paras. 14 et seq. of the CJEU judgment of 4 June 2026 – C-837/24). In this respect, there are clear parallels with the German rule in section 1(3) GrEStG, i.e. a share consolidation that is deemed to constitute an acquisition of real estate and is assessed by reference to the property value (section 8(2) GrEStG).

The CJEU held the taxation to be incompatible with the Capital Duty Directive 2008/7/EC (paras. 32 et seq. of the judgment). Five steps underpin the judgment, and extend beyond the Portuguese case:

• Scope: The formation of a capital company constitutes a capital contribution within the meaning of Article 3 of the Directive. At the same time, it is a restructuring operation under Article 4(1)(b), because shares carrying a majority of voting rights were contributed in exchange for the issue of shares. The fact that no other assets, funds or equity instruments are transferred at the same time is irrelevant. The prohibition on taxation in Article 5(1) applies to both transactions, i.e. to the capital contribution under point (a) and to the restructuring under point (e).
• Classification as an indirect tax: Whether a taxation is prohibited is determined autonomously by its objective characteristics, not by its classification under national law. Domestic legal fictions are expressly disregarded. The tax is not a direct tax because it is not levied on the generation of income or the holding of assets, but rather the transfer of shares. Nor is it relevant whom national law designates as the tax debtor, otherwise the prohibition could be circumvented by selecting a third party as debtor.
• Tax base: The fact that the tax is based on the value of the real estate rather than the value of the contributed shares does not save it. The prohibition in Article 5 is not restricted to levies imposed on the contribution as such, otherwise the provision would be deprived of its practical effect.
• Strict interpretation of the exemptions: Article 6 of the Directive is an exception to the principle of non-taxation. The “duties on the transfer of securities, whether charged at a flat rate or not;” under point (a) apply only to standalone transfers, not to transfers of shares that are merely ancillary to a capital contribution or restructuring. Point (c) does not apply because the contribution was specifically remunerated by company shares, while real estate transfer duty under point (b) requires a transfer of ownership of the immovable property determined according to general and objective criteria. That requirement was not met as the properties remained owned by the same companies. The Court rejected the argument advanced in the CJEU proceedings — including, notably, by Germany — that, from an economic perspective, a factual transfer was being taxed. In an intra-group restructuring, neither legal nor factual ownership is transferred.
• Anti-abuse: A rule that applies automatically once a participation threshold is exceeded, without examining whether there is any specific indication of an artificial arrangement, rests on a general presumption. It goes beyond what is necessary and is disproportionate.

What is new, therefore, is less the outcome than the clarity with which the Court declares national legal fictions and the designation of the tax debtor to be irrelevant. This rejects precisely the two arguments that have so far supported the opposing view in Germany.

Real estate transfer tax: Germany reviews, Austria acts

The German Federal Government’s view of the judgment has been available since 12 August 2026. Following a minor interpellation by the AfD parliamentary group (Bundestag printed matter/BT-Drs 21/7409 of 29 July 2026) containing sixteen questions on the status of the review, administrative instructions, case numbers, refund volumes and reform plans, the Government replied in BT-Drs 21/7608 over four pages. The reply is currently the only reliable statement at the federal level.

• The review is ongoing: “Since publication of this CJEU judgment, the Federal Ministry of Finance (BMF) has been comprehensively examining the reasons for the decision. This review is still ongoing.” There is no statement on the scope of the review, the review steps or interim findings regarding Section 1 paragraphs (2a), 1(2b), 1(3) and 1(3a) or Section 6a GrEStG, although these points were expressly addressed in the questions.
• The core position: “However, this judgment has no immediate impact on German real estate transfer tax because it was handed down in relation to the Portuguese ‘municipal tax on transfers of real estate’ […]. This differs from German real estate transfer tax.” The response does not explain what such difference is supposed to be. This is precisely where the dividing line lies. The CJEU classifies levies by reference to their objective characteristics and makes clear that national specifics — legal fiction, tax base, tax debtor — are not sufficient.
• The previous case law is cited as support: “In comparable cases, the German Federal Fiscal Court has so far refused to refer a preliminary ruling to the CJEU because it assumed that the German provisions were compatible with EU law. The German Federal Constitutional Court considered this previous refusal to refer to be constitutional in its order not to admit the constitutional complaint of 25 June 2026 (1 BvR 574/25).” This argument only goes so far. The order not to admit the constitutional complaint (of 25 June 2026 – 1 BvR 574/25) was issued in response to the constitutional complaint against the Federal Fiscal Court judgment of 25 September 2024 – II R 36/21 and concerns only the arbitrariness review under Article 101(1), second sentence, of the German Basic Law, not the substantive compatibility of section 1 GrEStG with the Directive. In addition, in para. 30 of the order, the Federal Constitutional Court expressly stated: “Whether the decision of the Court of Justice of the European Union of 4 June 2026 (C-837/24) would require a different assessment from today’s perspective cannot retroactively establish that the Federal Fiscal Court acted arbitrarily.”
• No action has been taken: “The BMF has not taken any measures within the meaning of question 2; it is noted that responsibility for the revenue and administration of real estate transfer tax lies with the federal states.” To date, therefore, there are no decrees, no coordinated procedural recommendations and no drafts on the treatment of restructurings, share consolidations and share acquisitions. The federal states were merely informed, in writing and in the meetings of the international tax departments from 9 to 11 June 2026 and of the representatives responsible for transaction taxes from 16 to 18 June 2026.
• No figures are available: “The Federal Government has no information on this because responsibility for the revenue and administration of real estate transfer tax lies with the federal states and the information is not collected separately or in isolation for statistical purposes.”
• The response does not comment on a possible legislative amendment: When asked whether an amendment to the GrEStG is required in order to create legal certainty and limit budgetary risks for the federal states, the response refers solely to the ongoing review. The same approach is taken for the question regarding the appeal proceedings pending before the Federal Fiscal Court under case no. II R 8/23 (as an appeal against the judgment of the Munich Fiscal Court of 8 February 2023 – 4 K 1671/20).

The fiscal dimension is quantified by the questioners themselves: average monthly real estate transfer tax revenue of almost EUR 1.3 billion in 2025 (BMF Monthly Report August 2025, p. 45). Refunds would affect the budgets of the federal states, while responsibility for designing substantive law in conformity with EU law lies with the federal legislator. The Federal Government neither disputes nor confirms this. For companies, the message is clear: There is currently no uniform federal administrative position, no suspension of proceedings ex officio, no commitment to suspend enforcement and no legitimate-expectations rule.

Austria provides an example of how an administration in an EU Member State can respond. In its guidance dated 29 July 2026, the Austrian Federal Ministry of Finance already commented on the effects of “Nova Iberomoldes” on Austrian real estate transfer tax and interpreted the scope of the Capital Duty Directive rather broadly.

According to that guidance, restructurings are covered if two conditions are met: shares must be granted at the level of the acquiring capital company, and, with regard to the shares in the real estate-owning company, there must be a change of shareholder or a share consolidation. It is irrelevant whether new shares are issued or existing shares are transferred. It is equally irrelevant whether the transaction falls within the Austrian Reorganisation Tax Act (UmgrStG). In the view of the Austrian BMF, this means that in particular the following are no longer subject to real estate transfer tax: the straightforward contribution of an equity interest in a real estate-owning company outside the UmgrStG, downstream and sidestream contributions or demergers of such interests or of businesses or parts of businesses holding such interests, sidestream mergers and corresponding “diagonal” intra-group transactions between different lines and levels of participation. The requirement that shares be granted has a limiting effect; particularly in intra-group transfers, this is often waived. The procedural statements on Austrian law are also notable. In the covered situations, EU law applies directly, and self-assessment and tax returns may be omitted. German case law is also familiar with this primacy of EU law (on the primacy of primary law, see for example Federal Fiscal Court of 13 June 2018 – I R 94/15, Federal Tax Gazette II 2020, 755, para. 27, on section 8(2) Foreign Tax Act old version; the direct applicability of Article 5 of the Directive, by contrast, follows from its sufficiently precise and unconditional wording).

The comparison is uncomfortable. Both countries have the same judgment, the same Directive and structurally comparable supplementary charging provisions. Austria drew consequences within two months, up to and including refraining from levying the tax, while in Germany the review is still ongoing and the federal states may proceed inconsistently in the absence of instructions. The Austrian guidance is not binding on German tax offices.

Section 1 GrEStG under the review framework of the Capital Duty Directive

German real estate transfer tax is neither an income tax nor a wealth tax. To the extent that it taxes transactions which qualify as a capital contribution or restructuring under EU law, the benchmarks set by the judgment indicate that it should be treated as an indirect tax covered by the prohibition on taxation. Whether the participation threshold is 75 percent or — as in section 1(2a) to (3a) GrEStG — 90 percent is not decisive. Nor does it help that these are supplementary charging provisions, that the tax base is the property value or that the real estate-owning company itself is the tax debtor. The assessment must be conducted by reference to the specific transaction. Broadly, five categories can be distinguished:

• Share consolidation and share transfer (section 1(3), (3a) GrEStG): If the transfer of shares takes place as part of a contribution in exchange for the granting of corporate rights, a capital increase by contribution in kind or a merger, it is ancillary to a capital contribution or restructuring. Justification under Article 6(1)(a) of the Capital Duty Directive is then excluded. The exemptions in Article 6(1)(b) and (c) also generally do not apply: There is, on the one hand, no transfer of ownership of real estate and, on the other hand, where the contribution is remunerated exclusively by shares, no harmful other consideration.
• Change of shareholders (section 1(2a), (2b) GrEStG): A distinction must be made here. If the transfer of at least 90 percent of the shares is based on a contribution or merger in exchange for the granting of shares, the same benchmarks apply as under subsection (3). However, this time-period-based provision also captures successive acquisitions by several independent acquirers within ten years; if there is no capital contribution or restructuring in such cases, the Directive is not engaged in the first place. These provisions were precisely the focus of the minor interpellation described above.
• Straightforward share purchases: If an investor acquires shares from a third party without any associated capital contribution or restructuring, then this is an independent transfer transaction. Article 6(1)(a) permits a tax on the transfer of securities in this respect. The classic share deal is therefore on considerably firmer ground.
• Contributions of real estate (section 1(1) GrEStG): If a parent company contributes real estate to its subsidiary in exchange for shares, ownership is transferred. Real estate transfer tax is then permissible as a tax on the transfer of possession under Article 6(1)(b) of the Capital Duty Directive. This applies all the more if no shares are granted for the contribution and the amount is instead credited to the capital reserve; Article 6(1)(c) then also applies. The position may be different, however, where — as in the intermediate transactions covered by section 1(1) nos. 5 to 7 GrEStG — there is no transfer of civil-law ownership.
• Power of disposal (section 1(2) GrEStG): If the power of disposal is granted by way of contribution, there is a capital contribution without a transfer of ownership of the real estate. Here too, an exemption under Article 6 of the Capital Duty Directive is difficult to justify.

The personal scope of application must be considered. Protected entities are capital companies within the meaning of the Annex to the Directive (AG, KGaA, GmbH and SE) as well as companies whose shares are tradable and whose shareholders have limited liability. For partnerships, in particular the GmbH & Co. KG, the scope remains open and must be substantiated on a case-by-case basis. Article 2(2) does support equal treatment of other companies pursuing profit-making purposes. However, whether and to what extent Member States may derogate from this under Article 9, and what this means for the prohibition on taxation under Article 5, requires a more detailed review in the individual case.

Section 6a GrEStG only mitigates the issue in specific cases: the group clause requires a participation of at least 95 percent, generally requires this participation to be maintained during five-year pre- and post-retention periods (on the teleological reduction of section 6a sentence 4 GrEStG, see Federal Fiscal Court of 21 August 2019 – II R 15/19 et al.), requires a group relationship with a controlling company and does not cover all charging provisions under section 1 GrEStG. It would be preferable to exclude transactions covered by the Directive already at the level of the charging provision, for example by introducing a new subsection in section 1 GrEStG declaring the supplementary charging provisions inapplicable where the transaction constitutes a capital contribution or restructuring and there is no transfer of ownership of the real estate. Austria shows that an administrative solution would also be conceivable.

The next stage is the appeal proceedings pending before the Federal Fiscal Court under case no. II R 8/23 concerning section 1(3) no. 4 GrEStG in the case of a merger with a capital increase. The Senate may find the provision incompatible itself or refer the question to the CJEU. In any event, the Court of Justice has undermined the key arguments supporting the previous position: national legal fiction, reference to the property value and tax debtor status of the company.

Conclusion: Keep real estate transfer tax assessments open now

Nova Iberomoldes does not decide the application of section 1 GrEStG — but it does decide the method by which section 1 GrEStG must be assessed. So far, the Federal Government has merely responded that the judgment concerned a different tax and otherwise refers to an ongoing review, while the Austrian tax administration has already refrained from levying the tax for comparable transactions. Responsibility therefore lies with the taxpayer. The following is recommended:

• Avoid finality: Lodge appeals against real estate transfer tax assessments relating to restructurings, share consolidations and changes of shareholders within the statutory deadline. A later judgment will generally no longer help assessments that have become final (on the relationship between EU law and national procedural law, see e.g. Federal Fiscal Court of 14 November 2018 – I R 47/16, Federal Tax Gazette II 2019, 419).
• Seek suspension of proceedings: With reference to the proceedings pending before the Federal Fiscal Court under case no. II R 8/23, it should be examined whether the requirements for statutory suspension of proceedings under section 363(2), second sentence, AO are met. Otherwise, suspension on grounds of expediency may be requested under section 363(2), first sentence, AO.
• Consider suspension of enforcement: Serious doubts can be based in particular on the operative reasoning of the CJEU judgment and the structural comparability of the supplementary charging provisions. The Austrian administrative practice additionally underlines that a different assessment under EU law is at least defensible. In the absence of uniform federal guidance, the federal states may handle cases inconsistently; interest on suspended amounts (section 237 AO) should be factored in.
• Continue to comply with notification obligations: Sections 19 and 20 GrEStG remain unaffected, albeit in the version of the “Ninth Act Amending Provisions in Tax Advisory Law and Tax Law”, which extended the notification deadline for parties in domestic cases from two weeks to one month and repealed section 16(4a) and section 16(5), second sentence, GrEStG. Failures may lead to late-filing surcharges (section 152 AO), suspension of the start of the limitation period under section 170(2), first sentence, no. 1 AO and preclusion under section 16(5) GrEStG.
• Secure transactions: Regulate in the SPA who is economically entitled to any future refund and document whether a share transfer is ancillary to a capital contribution or constitutes an independent acquisition.

Have you carried out, or are you planning, restructurings, contributions or mergers involving German real estate? We can review your real estate transfer tax assessments for potential EU law arguments, help safeguard the proceedings and support you in structuring the transaction. Please feel free to contact us at any time.