In practice, the so-called “signing-closing dilemma” leads to unintended real estate transfer tax risks in share-deal corporate sales involving real estate if the tight statutory reporting deadlines are not met. The Federal Fiscal Court could now help mitigate this risk of double taxation.
Starting point
In share deals, there is typically a time lag between the legal transaction (signing) and the actual completion and transfer of ownership (closing) of the shares. This is usually due to conditions precedent for the transfer of ownership—such as full payment of the purchase price—which postpone the closing to a later date.
Signing and Closing as Separate Tax-Related Transactions for Real Estate Transfer Tax Purposes
This can lead to unintended and unforeseen complications, particularly with regard to real estate transfer tax in share deals involving real property, unless all legal requirements regarding reporting obligations to the tax authorities are properly fulfilled by the deadline.
The sale of more than 90% of the shares in a partnership or corporation that owns land or real estate generally constitutes a taxable acquisition for real estate transfer tax purposes pursuant to § 1 (2a) and (2b) of the Real Estate Transfer Tax Act (GrEStG). Although, by its very wording, it is subsidiary in nature, the signing of the agreement nevertheless constitutes an independent taxable event under Section 1(3)(3) of the Real Estate Transfer Tax Act (GrEStG), which subjects even the binding agreement to transfer the shares to taxation.
This systematically unforeseen double taxation of the same transaction is resolved in § 16 et seq. of the Real Estate Transfer Tax Act (GrEStG), which waives the assessment of tax on the signing transaction pursuant to § 16(4a) GrEStG. This can become a problem if the parties fail to report the signing to the tax office in full and within the prescribed two-week period following the signing of the contract, since Section 16(5) of the GrEStG precludes the subsequent revocation of the tax assessment in such cases. Since the notary is not obligated in all cases to file a report with the tax office, it is often up to the parties to the acquisition transaction to file the report with the tax office, which, given a deadline of only two weeks, often leads to the deadline being missed in practice. Accordingly, based on current practice, this results in a double assessment of real estate transfer tax in such cases.
New Ruling by the Federal Fiscal Court—A Glimmer of Hope for Practitioners?
The highest tax authorities reaffirmed this view in 2024 and published it in identical rulings (BStBl I 2024, p. 383 ff., Margin Nos. 30–33). While they acknowledge the general priority of the acquisition tax under § 1 (2a) and (2b) of the Real Estate Transfer Tax Act (GrEStG), however, an assessment under Section 1(3) of the GrEStG should only be avoided if the signing and closing occur simultaneously; if the two events do not coincide, subsequent exemption from taxation at the time of signing is subject to the strict formal and time-limit requirements described above.
While this view has not yet been fundamentally overturned, it has at least been called into question on legal grounds in a ruling by the Federal Fiscal Court (BFH), which—in a case where one of the notices was not received by the deadline—granted a so-called suspension of enforcement (known as “AdV”) due to serious doubts regarding the legality of the regulation (BFH, ruling of July 9, 2025 – II B 13/25). In this case, the taxpayer is not yet required to pay the tax liability that is in question and is being challenged in the appeal.
In particular, the Federal Fiscal Court (BFH) did not agree with the substantive order of priority among the supplementary conditions—as advocated by the tax authorities—with respect to a specific cut-off date. The BFH does not view the introductory sentence of Section 1(3) of the Real Estate Transfer Tax Act (GrEStG) as subject to any temporal limitation, not even following the insertion of Sections 16(4a) and (5) of the GrEStG as part of the 2022 Annual Tax Act (JStG 2022).
Conclusion and Practical Recommendations
Even though the merits of the case have not yet been decided, the ruling can certainly be used as a defense by taxpayers who, in a similar case, failed to comply with their statutory reporting obligation for one of the transactions. Cases in which real estate transfer tax was assessed twice for this reason should therefore be kept open. In particular, tax-focused M&A advisors must pay close attention to this deadline in real estate-related deals to avoid liability consequences.
Nevertheless, it is still advisable to comply with the reporting requirements and deadlines set forth in the Real Estate Transfer Tax Act (GrEStG) and to gather the necessary information in advance of the sale of the business, particularly in order to meet the relatively tight two-week deadline. The tax authorities’ position is unlikely to change until a ruling is issued by the highest court on the matter, meaning that in cases currently arising where the signing and closing take place at different times, duplicate real estate transfer tax assessments will continue to be issued, and challenging them is likely to be time-consuming and costly.
