Anyone who acquires shares in a property-owning partnership via a trust arrangement and is subsequently formally entered in the commercial register must take particular care in two respects: In its judgement of 25 March 2026, the Federal Fiscal Court (BFH) clarified that the subsequent transfer of the partnership shares, which is effective under civil law, may trigger a further liability for land transfer tax, even if a trust arrangement already existed in economic terms prior to that. The case reference is II R 30/25, published on 2 July 2026.
What was the case about?
A GmbH & Co. KG, whose assets comprised a property in Germany, was at the centre of the legal dispute. The existing limited partners sold their shares to two purchasers by way of a notarised agreement dated 19 November 2013. At that time, the parties had already agreed that the former shareholders were to hold their shares in trust for the purchasers with retroactive effect from 1 January 2013. The trust relationship was to end as soon as the change of shareholders had been entered in the Commercial Register. This took place on 28 February 2014, after the purchase price had been deposited.
The tax office regarded both transactions as taxable acquisitions under section 1(2a) of the Real Estate Transfer Tax Act (GrEStG): in one instance, upon the establishment of the trust relationship, and in the other, upon the formal transfer of the company shares following their entry in the commercial register.
What did the Finance Court rule, and what did the Federal Fiscal Court rule?
The Saxon Finance Court had initially ruled in favour of the KG. It argued that, at the time of entry in the commercial register, the plots of land were no longer attributable to the KG for the purposes of land transfer tax, as they had already become the subject of a transfer transaction through the trust arrangement.
The Federal Fiscal Court (BFH) set aside this judgement. The judges emphasised two key points:
- The civil law perspective is decisive: In the case of an immediate change in the composition of the shareholders, the sole determining factor is when the shares are transferred in rem – that is, with legal effect under civil law – to the new shareholders. Economic considerations are irrelevant. Anyone who was previously only a settlor becomes a shareholder under civil law for the first time upon entry in the commercial register and is thus regarded as a new shareholder within the meaning of the law.
- The allocation for the purposes of land transfer tax remains in force: For the purposes of land transfer tax, a plot of land is deemed to belong to a company until a third party fulfils the conditions for a separate acquisition under section 1(1) or section 1(2) of the Land Transfer Tax Act (GrEStG). A trust agreement which relates solely to shares in a company does not confer on the settlor any right of disposal over the land itself that is relevant for the purposes of land transfer tax. The conditions set out in Section 1(2) of the Land Transfer Tax Act (GrEStG) were therefore not met.
What does that mean in practice?
The ruling has significant implications for anyone acquiring or transferring shares in property-owning partnerships. Anyone who believes that using a trust arrangement as an intermediary will enable the subsequent formal transfer of shares to be exempt from land transfer tax will find that the Federal Fiscal Court (BFH) has proved them wrong.
In practical terms, this means that both the establishment of the trust relationship and the subsequent transfer of the shares by way of a transfer in rem may each give rise to separate land transfer tax liabilities. A double tax burden is therefore possible.
Anyone planning structured share transfers involving property held as part of the company’s assets should carefully assess the tax implications in advance. In such circumstances, it is advisable to seek advice from a tax adviser or solicitor before finalising the contractual arrangements.
Source: Haufe: Tax
This article was created with the help of AI and has been editorially reviewed.
