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Amendments to the Land Transfer Tax Act to prevent double taxation in cases where the signing and closing take place on the same day are on the horizon

Following the Federal Fiscal Court’s (BFH) expression of doubts regarding the tax authorities’ practice and the legislative approach – which can lead to double taxation in the case of share deals – the Federal Government is now also responding to this issue. With the draft of the Ninth Act Amending the Tax Consultancy Act and Amending Further Tax Legislation of 14 January 2026, the aim is to amend the relevant provisions of the Real Estate Transfer Tax Act (GrEStG) in order to prevent, in future, a situation where, in the case of a share deal, both the conclusion of the purchase agreement (known as ‘signing’) under section 1(3)(1) or (3) of the GrEStG and the transfer of shares (known as ‘closing’) under section 1(2a) or (2b) of the GrEStG may be subject to land transfer tax.

According to the tax authorities’ current interpretation, both the ‘signing’ and the ‘closing’ are subject to tax if each constitutes, in its own right, a transaction constituting an acquisition under
Section 1(2a) or (2b) or under Section 1(3) of the GrEStG, the two events take place at different times and neither has been notified to the tax office in due form and within the prescribed time limit in accordance with the requirements of Section 16(4a) and (5) of the GrEStG in conjunction with Sections 19 and 20 of the GrEStG.

The Federal Fiscal Court (BFH) has already expressed considerable doubts regarding this administrative interpretation in two proceedings for interim relief (see our articles of 25 August 2025 and 17 November 2025). These doubts apparently also prompted the Federal Government to completely revise the relevant provisions. The draft bill provides, amongst other things, for the recasting of Section 1(3) and (3a) of the GrEStG. The introductory sentence of Section 1(3) of the GrEStG, which previously governed the relationship between the transactions and whose ambiguous interpretation led to the tax authorities’ view, is to be deleted. It is to be replaced by a new paragraph 3b. Accordingly, taxation under Section 1(2a) or (2b) of the GrEStG (taxation of the closing) shall not apply if the shares are transferred in fulfilment of a legal transaction (signing) within the meaning of Section 1(3)(1) or (3) of the GrEStG following its conclusion, or are transferred in accordance with (2) or (4).

Henceforth, where the ‘signing’ and ‘closing’ take place at different times, land transfer tax would only be assessable once, exclusively in respect of the ‘signing’. Accordingly, there is no longer any need to retain the corrective provision in Section 16(4a) of the GrEStG; Consequently, the draft therefore provides for the deletion of the correction provision. A notification remains required (Section 19 of the GrEStG). However, a notification that is not submitted within the prescribed time limit or in the prescribed form will no longer result in double taxation.

The amendment also means that the value of the property is now to be taken as the basis for taxation only at the time the contract of sale is concluded. Previously – provided that a correct notification had been made in accordance with Section 16(4a) of the GrEStG and thus only a single assessment had been carried out – only the property value at the time of closing would have been decisive.

The amendment is to be welcomed, as it prevents senseless double taxation in cases where the parties fail to submit a notification in the correct form or within the prescribed time limit due to ignorance or carelessness. Moreover, the proposal represents a pragmatic solution. However, changes to the composition of the property portfolio between the signing and closing dates will no longer be taken into account for tax purposes in future. The purchaser must therefore pay tax on the property value as determined at the time the purchase agreement was concluded. If properties are subsequently sold, this will have no bearing on the tax assessment. However, a similar risk existed previously, as additional acquisitions made between the signing and closing were taken into account in the (prior) tax assessment for the closing, thereby increasing the value and consequently the tax liability.

It remains to be seen whether the Federal Government’s draft bill will be passed by the Bundestag without amendment.

Practical guidance:

Should the Bundestag pass the law, it will apply only to new cases, i.e. share purchases that meet the requirements of Section 1(2a) or (2b) of the Real Estate Transfer Tax Act (GrEStG) and Section 1(3)(1) or (3) of the GrEStG, respectively, after the Act comes into force. For existing cases, the tax authorities’ current position remains in force, as does the risk of double taxation, unless the signing and closing were notified in due time and in the correct form. However, given the doubts already expressed by the Federal Fiscal Court (BFH), there is a distinct possibility that, even in cases where such notification was omitted, the property transfer tax assessment relating to the closing can be successfully challenged. To do so, however, an objection must be lodged with the tax office against this assessment within the prescribed time limit.