The case: shortening a chain of shareholdings within a group
A real-estate-holding GmbH was initially wholly owned by a parent company, which was in turn wholly owned by a grandparent company. That indirect stake of the grandparent company had itself already been subject to real estate transfer tax in 2019 — by acquiring all shares in the parent company, the grandparent had realised an indirect consolidation of shares under Section 1 (3) GrEStG. In 2021, the parent company transferred all shares in the real-estate-holding company directly to the grandparent company — shortening the chain of shareholdings and removing the parent company from the structure. Economically, nothing changed for the real-estate-holding company: before and after, it was (indirectly, then directly) wholly attributable to the same corporate group.
The tax office nonetheless assessed real estate transfer tax under Section 1 (2b) GrEStG — the provision that captures a change of at least 90% in the shareholder base of a corporation within ten years. The taxpayer objected: the grandparent company had already been an indirect shareholder and should therefore be treated as an existing shareholder, not a new one — meaning the transaction should not be taxable at all.
The legal question: existing or new shareholder?
At the heart of the dispute lay a definitional question the statute does not expressly answer: is a party who was already indirectly participating through an intermediate corporation to be treated as an existing shareholder when it directly acquires the shares in the real-estate-holding company — or as a new shareholder, because it becomes a direct holder of the shares for the first time? The taxpayer relied on a parallel line of case law under Section 1 (3) GrEStG, where the Federal Fiscal Court (BFH) does not treat a mere “chain-shortening” as an independently taxable event, because it does not “strengthen” the legal position of a party already indirectly participating.
The decision: civil law governs direct changes
The Fiscal Court of Baden-Württemberg dismissed the claim. What mattered was the distinction between a direct and an indirect change in the shareholder base: only for an indirect change does an economic assessment apply — because civil law does not recognise an “indirect” change of shares at all. Where, as here, a direct change occurs, only the civilly effective transfer of the membership right counts. The pre-existing indirect stake is irrelevant to the assessment of the tax event. The grandparent company therefore became — despite its prior economic proximity to the real-estate-holding company — a new shareholder as a matter of law.
The court expressly relied on the settled BFH case law developed under Section 1 (2a) GrEStG (the parallel provision for partnerships) and applied it to Section 1 (2b) GrEStG. The court rejected the existence of a legislative gap that would justify an interpretation departing from the wording in the taxpayer’s favour: the legislature had deliberately intended Section 1 (2b) GrEStG as a comprehensive supplementary provision to capture avoidance structures using corporations — an exception for intra-group chain shortenings would run directly counter to that purpose.
Not a case of double taxation
Of particular practical relevance is the court’s treatment of the double-taxation argument. The taxpayer argued that the tax under Section 1 (2b) GrEStG was impermissibly added to the tax already levied in 2019 under Section 1 (3) GrEStG on the same economic transaction. The court disagreed: real estate transfer tax, as a transaction tax, captures the specific legal transaction realised — not an economic end result. In 2019, the indirect consolidation of shares in the parent company was taxed (a transaction at the level of the shareholding structure); in 2021, the direct change of shareholder in the real-estate-holding company itself was taxed (an independent transaction at company level). Both transactions must be assessed independently of one another under the law, even though they are economically connected. The court further noted that multiple real estate transfer tax attribution of the same property within chains of shareholdings is not foreign to the system but inherent to it.
Compatibility with Article 3 of the Basic Law
The taxpayer also alleged a violation of the principle of equal treatment: where a chain is shortened indirectly through an intermediate partnership, the transaction remains non-taxable under the tax authorities’ administrative guidance, whereas the same is not true for a corporation — an allegedly unjustified distinction by legal form. The court rejected a violation of Article 3 of the Basic Law (GG): the differing treatment of partnerships and corporations under real estate transfer tax law is based on structural differences regarding the separation of company assets from their owners, and is therefore objectively justified — the cases are not substantially comparable. The court expressly left open whether this assessment still holds following the fundamental reform of German partnership law under the MoPeG as of 1 January 2024 — for the transaction realised in 2021, that question did not need to be decided.
Practical consequences for restructurings
For practice, the decision means: anyone shortening a chain of shareholdings in a real-estate-holding corporation within a group — for example by transferring shares directly from a parent to a grandparent company — generally triggers an independent, taxable event under Section 1 (2b) GrEStG, even where the ultimate economic ownership of the stake does not change and even where the prior indirect stake had already triggered real estate transfer tax once before.
Important for planning purposes: the judgment is not yet final. The appeal was admitted and is pending before the Federal Fiscal Court under case number II R 24/24 — the question of chain-shortening within the scope of Section 1 (2b) GrEStG has therefore not yet been settled by the highest court. Pending the BFH’s decision, particular caution is advisable for planned intra-group restructurings of this kind: assessing whether the group relief under Section 6a GrEStG might apply (in particular compliance with the pre- and post-holding periods it requires), carefully documenting the shareholding history to guard against a potential double burden in a dispute, and — depending on the structure — examining alternative structuring routes that avoid a direct transfer of shares. Given the open legal question, affected tax assessments should generally not be allowed to become final, but kept open by reference to the pending appeal proceedings.
This article presents a simplified overview of the legal position and does not replace advice in individual cases.