Changes in the Taxation of Real Estate Transactions in Germany: New Court Approaches and Practical Implications

In July 2025, Germany witnessed a development at the highest level of tax law that could reshape how real estate transactions through corporate structures are treated. The Federal Fiscal Court (Bundesfinanzhof, BFH) raised doubts about the legality of the existing taxation practice concerning the transfer of shares and stakes in companies holding real estate.

Double taxation of real estate transactions: the core issue

Up to now, the principle has been as follows: when a property was transferred indirectly – by acquiring shares or stakes in a company that owned the asset – tax authorities treated it as a real estate transaction and imposed real estate transfer tax (Grunderwerbsteuer).

In practice, this often led to double taxation of the same asset:

• at the time of signing the share purchase agreement,
• at the actual transfer of ownership of shares or stakes.

This double burden has long been criticized by lawyers, investors, and developers because it raised transaction costs and reduced the investment appeal of the real estate sector.

The Federal Fiscal Court’s decision

On 9 July 2025, the BFH stated that this practice may conflict with constitutional principles of tax fairness. The court questioned the legitimacy of applying the real estate transfer tax twice to a single transaction and referred the matter for further review.

While this decision does not yet abolish the current practice, it creates legal uncertainty. Market participants expect that either a legislative clarification or specific amendments to tax law will follow in the near future.

Implications for businesses and investors

These developments require a more careful assessment of tax risks:

• Buyers acquiring property through corporate structures may contest tax assessments if there are signs of double taxation.
• Sellers must be aware that tax obligations may change even after the deal is signed.
• Investors anticipate potential relief, which could revive M&A activity in the real estate sector.

Significance for legal practice

This case reflects a broader trend in Germany: tax courts increasingly question long-standing practices once considered established. For lawyers, this means not only advising clients during the transaction but also preparing them for possible tax disputes afterwards.

Outlook

If the BFH’s position prevails, it would mark a significant step toward harmonizing tax law with the principle of fair taxation. A scenario is possible in which transactions involving company shares are taxed only once – at the moment of actual transfer of ownership.

For investors, this would be welcome news: reduced tax burdens increase transparency and predictability in the market, which is particularly important in times of economic uncertainty and rising interest rates.

Conclusion

The changes in the taxation of real estate transactions in Germany are still evolving. Yet it is already clear that the Federal Fiscal Court’s July 2025 ruling may become a turning point for the market. Lawyers and businesses should closely monitor future developments to adapt their tax planning strategies in time.