BFH, judgment of 25 March 2026 – II R 30/25:
- Where real estate forms part of the assets of a partnership, the real estate transfer tax attribution of such property is not affected by the mere fact that a partner enters into a trust agreement to hold the partnership interest on behalf of a settlor. A trust agreement relating solely to partnership interests does not trigger the requirements of sec. 1(2) of the German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz, “GrEStG“).
- The acquisition of a direct interest in a partnership holding real estate by the settlor from the trustee fulfils – subject to the further requirements of the provision – the conditions of sec. 1(2a) sentence 1 GrEStG.
A. Background of trust arrangements in an M&A context
When acquiring a limited partnership interest (Kommanditanteil), the effective date of the assignment and the registration of the acquirer as limited partner in the commercial register (Handelsregister) regularly do not coincide. In the interim period, the new limited partner is personally and unlimitedly liable pursuant to sec. 176(2) of the German Commercial Code (Handelsgesetzbuch ) for obligations of the partnership incurred during that period. To avoid this, the assignment is typically structured as subject to the condition precedent of registration of the succession in the commercial register, so that the transfer in rem only becomes effective upon registration.
To bridge the period between the intended economic transfer date and the effective date of the assignment, a trust arrangement (Treuhandabrede) is used in practice. The selling partner holds the limited partnership interest in trust for the acquirer until registration, with the trust being subject to the condition subsequent of registration of the special succession in the commercial register. For income tax purposes, the limited partnership interest is attributed to the settlor – i.e. the new partner – from the inception of the trust arrangement pursuant to sec. 39(2) no. 1 sentence 2 of the German Fiscal Code (Abgabenordnung, “AO“).
B. The decision of the Federal Fiscal Court (II R 30/25)
1. Facts of the case
The case concerned such a constellation. The plaintiff was a GmbH & Co. KG holding real property. By notarial agreement dated 19 November 2013, all limited partnership interests were sold to A (70%) and B (30%). The transfer in rem was subject to the conditions precedent of deposit of the purchase price and registration in the commercial register. Until then, the existing limited partners were to hold the interests in trust for A and B with economic effect as of 1 January 2013. On 28 February 2014, A and B were registered as new limited partners in the commercial register. The tax authority treated both the creation of the trust arrangement and the subsequent transfer in rem as independently taxable events under sec. 1(2a) sentence 1 GrEStG. The lower fiscal court (Finanzgericht), by contrast, denied a second taxation following registration, holding that the real property was no longer attributable to the KG at the time of the change in partners.
2. Reasoning of the court
The Federal Fiscal Court (“BFH”) reversed the lower court’s judgment and affirmed that the requirements of sec. 1(2a) sentence 1 GrEStG were met. The provision essentially requires that (i) domestic real property forms part of the assets of a partnership and (ii) within ten years, the composition of partners changes directly or indirectly such that at least 90 percent of the interests in the partnership assets pass to new partners. The legal consequence is the fiction of a transaction aimed at the conveyance of real property to a new partnership.
- With regard to a direct change in the composition of partners, the BFH assesses whether an incoming partner qualifies as a “new partner” exclusively on the basis of civil law principles. The decisive criterion is solely the change in the proprietary (in rem) partnership position.
A person previously participating only indirectly through a trust arrangement therefore becomes a partner under civil law only upon the transfer in rem and does not qualify as an existing partner within the meaning of sec. 1(2a) sentence 1 GrEStG. The fact that the interest was previously attributed to that person economically pursuant to sec. 39 AO is irrelevant. According to the BFH, an economic substance approach is only applicable in the case of an indirect change in the composition of partners, because civil law does not recognise an indirect partnership interest.
In the case at hand, the direct composition of partners of the plaintiff changed entirely upon the registration of A and B as new limited partners in the commercial register on 28 February 2014.
- Whether real estate “forms part of the assets” of a partnership within the meaning of sec. 1(2a) sentence 1 GrEStG is determined by the attribution rules specific to real estate transfer tax, which are governed neither by civil law nor by sec. 39 AO.
This attribution is not affected by the fact that a partner holds the interest in trust for a third party. Sec. 1(2a) GrEStG merely creates the fiction of an acquisition of real estate by a new partnership, without attributing the real estate to the acquirer of the interest for real estate transfer tax purposes.
The requirements of sec. 1(2) GrEStG (conferral of the power to exploit), which could lead to a different attribution, are likewise not met by a trust agreement relating solely to partnership interests. This is because an interest in the assets of a partnership does not confer an economic power to exploit the real estate held by the partnership within the meaning of sec. 1(2) GrEStG.
Accordingly, the real estate remained attributable to the plaintiff for real estate transfer tax purposes at the time the tax arose on 28 February 2014.
- The BFH denied the tax exemption under sec. 6(3) in conjunction with sec. 6(1) GrEStG due to the lack of identity of participation between the transferring and the acquiring joint ownership (Gesamthand). While the BFH considers sec. 3 no. 8 GrEStG to be generally applicable to acquisition events under sec. 1(2a) GrEStG, it denied the exemption because A and B became civil law partners for the first time, and therefore the required re-acquisition was not present.
As a result, the BFH upheld the real estate transfer tax assessment for the change in partners as of 28 February 2014. In addition to the creation of the trust arrangement, real estate transfer tax was thus triggered a second time.
C. Our assessment
The decision is consistent with the line already established by the BFH judgment of 5 November 2025 (II R 9/23). Unlike the present case, however, the acquisition of the trustee position in that case had not yet triggered real estate transfer tax because the partnership had acquired the real estate only thereafter.
For advisory practice, this means that the customary trust structure used in transfers of interests in partnerships holding real estate will regularly result in a double real estate transfer tax burden.
A potential point of challenge remains only with respect to the taxation of the creation of the trust arrangement itself. In the decision discussed here, the BFH was able to leave open – for lack of relevance to the outcome – whether the mere conclusion of the trust agreement already triggers sec. 1(2a) sentence 1 GrEStG.
Based on the case law of the BFH (judgment of 25 November 2015 – II R 18/14), this is likely to be answered in the affirmative.
To the extent the transaction structure permits, a structuring option to consider is in particular compliance with the 90% threshold of sec. 1(2a) sentence 1 GrEStG. Where the relationship between the parties allows, it should be examined whether arrangements with a lesser degree of binding effect may be used as an alternative (cf. BFH, judgment of 30 August 2017 – II R 39/15).
For further information, please contact:
Michael Brüggemann, Bird & Bird
michael.brueggemann@twobirds.com
