Insights
HR & PAYROLL
Allowances in Real Estate Transfer Tax for Business Transfers
If domestic land is part of business assets, allowances may be available for (partially) gratuitous transfers to a successor, reducing the tax burden.
The prerequisite for claiming a real estate transfer tax (Grunderwerbsteuer, GrESt) allowance in business transfers is that the transaction is a gratuitous or partially‑gratuitous legal act. A purchase is considered gratuitous if the value of the consideration does not exceed 30 %, and partially‑gratuitous if the consideration does not exceed 70 % of the value.
Furthermore, it is required that the affected land forms part of the business assets of an enterprise or a sub‑enterprise. In the case of partnerships, such as a partnership firm, the benefit can also be claimed for land in the special business assets of a partner (i.e. land that is civil‑law owned by the partner but made available to the partnership for business use), provided that the transferring partner transfers this land together with his partnership interests and, at the time the tax liability arises, holds at least 25 % of the partnership’s assets.
Conditions for the Benefit
To claim the benefit, the following conditions must be met:
It should be noted, however, that the purchaser – where the GrESt is later collected without taking the allowance into account – must not transfer the benefited assets (or substantial parts thereof) within a holding period of five years for consideration or gratuitously, use them for non‑business purposes, or cease the (part) business.
Business Transfers in Agriculture and Forestry
If the assets to be transferred are used to generate income from agriculture or forestry, the allowance for gratuitous acquisitions and where the above conditions are met is EUR 365,000. The scope of the allowance for agricultural and forestry land, however, is limited to transfers to persons within the family circle (relatives). Consequently, compared with the business allowance for trade/self‑employment, the benefit has a narrower scope for agricultural and forestry transfers.
Furthermore, it is required that the affected land forms part of the business assets of an enterprise or a sub‑enterprise. In the case of partnerships, such as a partnership firm, the benefit can also be claimed for land in the special business assets of a partner (i.e. land that is civil‑law owned by the partner but made available to the partnership for business use), provided that the transferring partner transfers this land together with his partnership interests and, at the time the tax liability arises, holds at least 25 % of the partnership’s assets.
Conditions for the Benefit
To claim the benefit, the following conditions must be met:
- The acquiring person is a natural person
- The transferring person can no longer continue the business because of death, age (completion of the 55th year of life) or incapacity to work (physical, mental or cognitive impairment)
- The transferring person must transfer at least 25 % of the business (enterprise, partnership interests) (corresponding proportional allowance)
- The benefit also applies to transfers outside the family circle
It should be noted, however, that the purchaser – where the GrESt is later collected without taking the allowance into account – must not transfer the benefited assets (or substantial parts thereof) within a holding period of five years for consideration or gratuitously, use them for non‑business purposes, or cease the (part) business.
Business Transfers in Agriculture and Forestry
If the assets to be transferred are used to generate income from agriculture or forestry, the allowance for gratuitous acquisitions and where the above conditions are met is EUR 365,000. The scope of the allowance for agricultural and forestry land, however, is limited to transfers to persons within the family circle (relatives). Consequently, compared with the business allowance for trade/self‑employment, the benefit has a narrower scope for agricultural and forestry transfers.