Commercial law firms like the German branches of the US law firm McDermott Will & Emery also live on the idea of tailoring investment models to their clients, ensuring adequate returns and avoiding tax payments. In real estate transactions, this is still legally possible by simply putting the property or building for sale into a company coat, and then not changing the real estate but the company's shares.
Share deals are called such transactions and are exempt from real estate transfer tax under certain conditions. Cleverly designed, it can easily save tens of millions of dollars on transactions worth hundreds of millions of dollars (how the trick works, read here).
This has long been a nuisance to the finance ministers of the federal states, but the federal government has been adoring itself for years to close the tax loophole. Only Finance Minister Olaf Scholz (SPD) has now brought a bill on the way, the share deals should make it much more difficult.
But maybe the law will miss its effect. After all, consultants such as the law firm McDermott have long been working on alternatives to legal tightening such tightening of laws. "Many law firms have already prepared for the situation and advised their clients as a precautionary measure," said a McDermott lawyer in May, the law firm platform Juve.
And the industry has already found the ideal model. It's called Unit Deal. The property to be sold is placed in a fund managed by a trustee.
"Fire accelerator for speculation with real estate"
And this construct will probably remain tax-exempt even after the change in the law. To this conclusion comes a hitherto unpublished report of the legal service of the Bundestag, which is the SPIEGEL. "However, this amendment is not suitable to prevent any tax avoidance by unit deals," says the opinion of the parliamentary lawyers. Sticking point is according to the Federal Government report the trust construction in the fund model. This would also make every "transfer of shares subject to a fee" tax-exempt.
more on the subject
"It is unfair that the young family has to pay land purchase tax when buying a home, while large real estate companies can shirk it," says Lisa Paus, finance spokeswoman for the Greens parliamentary group. In addition, "that the quick resale of real estate is only worthwhile with tax exemption". Thus, according to the Green politician, tax loopholes as about the unit deals "the fire accelerator for the speculation of real estate and the overheated housing market."
And how effectively unit deals can replace the incriminated share deals, the industry has already durchexerziert. At the end of last year, the Hessisch-Thüringische Landesbank bought 21 commercial properties from a Berlin investment manager for around half a billion euros. The transaction was executed as a unit deal. The real estate had been previously packed into a fund. Real estate transfer tax was not due. "At least in the short to medium term," says a McDermott lawyer, "the attractiveness of unit deals could increase."