RETT Reform in Germany: What Changes in Real Estate Transaction Taxation

In January 2026, the German Federal Government introduced a draft bill to amend the German Real Estate Transfer Tax Act (RETT). These are far more than technical adjustments: the proposed rules directly affect transaction structuring, the allocation of tax risks, and contractual practice in M&A deals involving real estate. For companies and investors, the reform promises greater legal certainty. For legal advisors, it creates a renewed focus on tax-sensitive transaction structuring.

The Core Issue Under the Old Rules: Double Taxation Risk

Until now, one of the most controversial aspects of German RETT has been the risk of double taxation in share deals involving real estate holding companies. In practice, a taxable event could be triggered both at the time of signing the share purchase agreement (signing) and again at the later transfer of shares (closing). Where these stages were separated in time and involved distinct legal steps, tax authorities could treat them as independent taxable events.

For businesses, this meant not only higher transaction costs but also significant legal uncertainty. Agreements required detailed tax clauses, indemnity mechanisms, and carefully negotiated RETT risk allocation between the parties. Even minor drafting inaccuracies could undermine the economic basis of the deal.

A New Approach: One Tax Event Instead of Two

The draft reform aims to fundamentally change this logic. In share transfers, RETT would in the future be linked to the conclusion of the binding contractual agreement, provided that the contract establishes an obligation to transfer the shares at a later stage. The subsequent closing would generally no longer qualify as a separate taxable event. This would remove one of the main causes of double taxation.

From a legal perspective, this significantly increases the importance of the contractual phase of the transaction. The wording of the Share Purchase Agreement (SPA), the structure of conditions precedent, and the mechanics of completion become even more decisive, as they effectively determine the point in time when the tax liability arises.

Notification Duties and New Potential Tax Debtors

The reform also proposes extending the deadline for notifying the tax authorities of relevant transactions to one month. While this appears to be a technical simplification, in practice it gives the parties more time to comply with formal requirements and reduces the risk of penalties for late filings.

Another key change is the expansion of the group of potential tax debtors. In certain cases, the real estate holding company itself may be treated as liable for RETT alongside the direct transaction parties. This is particularly relevant in cross-border structures: the German tax authorities gain an additional enforcement mechanism even where the purchaser is located outside Germany.

Practical Implications for Businesses and Investors

From an investment perspective, the reform is designed to increase the predictability of real estate transaction taxation in Germany. Eliminating double RETT triggers reduces fiscal risk and makes share deal structures more transparent. At the same time, shifting the decisive tax point to the signing stage means that tax and financial planning must begin earlier than before.

This is precisely where legal counsel becomes even more important. Transaction structures must be carefully designed, tax and corporate provisions in the agreements must be aligned, and potential joint and several liability risks must be assessed. Errors in drafting or in sequencing legal steps can quickly negate the benefits of the new regime.

Conclusion

The draft RETT reform represents a significant step toward a more coherent and systematic framework for taxing real estate transactions in Germany. However, legislative simplification does not automatically translate into lower practical risk. On the contrary, legal precision and well-structured transaction planning become even more critical. For companies, investors, and real estate funds, professional legal advice will be a key factor in ensuring tax certainty.