BFH on the Prior Holding Period in a Demerger Under the UmwG
The Bundesfinanzhof (BFH, Federal Fiscal Court) ruled on 29 July 2026 on how the prior holding period is to be treated in the context of the real estate transfer tax relief under § 6a GrEStG (German Real Estate Transfer Tax Act) where a company had previously been demerged under the Umwandlungsgesetz (UmwG, German Transformation Act). According to the decision of the Second Senate, a holding existing for more than five years that the demerged company held in a dependent company may be attributed to the acquiring company if that holding was the subject matter of the demerger and transfer agreement.
The BFH thereby confirmed, in proceedings II R 5/23, the decision of the FG Münster (Münster Fiscal Court) of 12 January 2023. The Fiscal Court had amended the contested assessment notice of 5 September 2018, as amended by the objection decision of 18 December 2020, in favour of the claimant. The 8th Senate of the FG Münster had held that no real estate transfer tax was to be levied under § 6a GrEStG for the transfer of ownership of the properties concerned.
Tax Relief Under § 6a GrEStG
§ 6a GrEStG provides, subject to certain requirements, for relief in the case of restructurings within a group that are taxable for real estate transfer tax purposes. It covers, in particular, certain transactions under the Umwandlungsgesetz, provided that only a controlling undertaking and one or more companies dependent on it are involved in the taxable legal transaction.
Under the statutory framework, a dependent company exists where the controlling undertaking holds an uninterrupted interest of at least 95 percent during the five years before and the five years after the legal transaction. These pre- and post-retention periods are of central importance for the application of the provision. In the disputed case, the focus was in particular on the pre-retention period.
Importance of the Group Clause in Transformations
The relief under § 6a GrEStG may become relevant in restructurings where, through a merger, division or other transformation transactions, real estate or rights equivalent to real estate are transferred for real estate transfer tax purposes. However, the provision requires that the favoured transaction take place within the legally prescribed shareholding relationship.
The BFH had to clarify whether a holding period that initially existed at a demerged company may be attributed to an acquiring company for the purposes of § 6a GrEStG. This did not concern a general attribution in every transformation case, but rather the specific situation of a demerger under the Umwandlungsgesetz and the transfer of the holding in the division and transfer agreement.
Facts of Proceedings II R 5/23
The proceedings were based on a group structure in which a Kommanditgesellschaft (KG, limited partnership) had been the sole shareholder of a real-estate-owning GmbH (limited liability company) since 1993. This GmbH owned real estate and held a heritable building right in another property. Two natural persons held equal interests in the limited partnership.
In 2010, both shareholders contributed their respective limited partnership interests to newly established GmbHs. The limited partnership was then demerged under the Umwandlungsgesetz. As part of the division and transfer agreement, one business unit, including the holding in the real-estate-owning GmbH, was transferred to the claimant; another business unit was transferred to another GmbH.
In 2013, the real-estate-owning GmbH was merged into the claimant. This merger was the taxable transaction under § 1 Abs. 1 Nr. 3 Satz 1 GrEStG (Section 1(1) no. 3 sentence 1 of the German Real Estate Transfer Tax Act). According to the findings, only the claimant and the real-estate-owning GmbH were involved in the merger.
Assessment Notices and Procedural History
On 13 December 2013, the Finanzamt (Tax Office) had already issued a notice on the separate determination of the bases of taxation for real estate transfer tax as of the relevant reporting date in 2013. Upon the claimant’s application, this notice was initially amended with regard to the description of a heritable-building-right property.
The claimant later applied for the merger to be treated as a restructuring benefiting from relief under § 6a GrEStG. The Tax Office initially amended the notice accordingly and determined that the transfer of the properties was tax-privileged under § 6a GrEStG and that EUR 0 was to be used as the tax base in each case.
Following an audit, the Tax Office changed its view. It took the position that § 6a sentence 1 GrEStG was not applicable because the pre-retention period under § 6a sentence 4 GrEStG had not been complied with. It then issued an amended notice on 5 September 2018 and lifted the reservation of review. The claimant’s objection was unsuccessful.
Decision of the FG Münster
The action before the FG Münster was successful. The judgment of the 8th Senate of 12 January 2023 bears the case reference 8 K 169/21 F and the ECLI ECLI:DE:FGMS:2023:0112.8K169.21F.00. The Fiscal Court amended the assessment notice of 5 September 2018, as amended by the objection decision of 18 December 2020, to the effect that no real estate transfer tax is levied for the transfer of ownership of the properties concerned.
The FG Münster assumed that the merger did fulfil the requirements of § 1 Abs. 1 Nr. 3 Satz 1 GrEStG. At the same time, however, it considered the requirements for tax relief under § 6a GrEStG to have been met. Only the claimant and the real-estate-owning GmbH had been involved in the merger.
Attribution Under § 45 AO
According to the findings, the claimant was attributed the limited partnership’s 100 percent holding in the real-estate-owning GmbH, which had existed since 1993. The FG Münster based this on legal succession in connection with the demerger and the provision of § 45 AO (German Fiscal Code).
For legal reasons, the post-retention period could not be complied with in the merger. According to the BFH’s case law, it therefore did not have to be complied with in such a constellation. The pre-retention period, by contrast, could not be waived; the decisive question was therefore whether the earlier holding period of the demerged company could be attributed to the claimant.
BFH Confirms Attribution of the Prior Holding Period
The BFH dismissed the Tax Office’s appeal on points of law against the judgment of the FG Münster as unfounded. The defendant was ordered to bear the costs of the appeal proceedings. The decision of the FG Münster therefore remained in force in its result.
According to the BFH, for the purposes of § 6a GrEStG, a holding of more than five years held by the demerged company in a dependent company is to be attributed to the acquiring company as partial universal successor if the holding in the dependent company was the subject matter of the demerger and transfer agreement. The BFH thus linked attribution to the specific transfer of the holding as part of the demerger.
Partial Universal Succession as the Decisive Point of Reference
In a demerger under the Umwandlungsgesetz, the assets of the transferring company pass to the acquiring legal entities in accordance with the allocation provided for in the division and transfer agreement. For the real estate transfer tax relief, the BFH focused on the fact that the acquiring company became the partial universal successor with regard to the transferred holding.
For the prior holding period, this means: If the holding of the demerged company in the dependent company had already existed for more than five years, this period may benefit the acquiring company to the extent that this very holding was transferred to it. This does not result in any detached or general attribution irrespective of the subject matter of the division and transfer agreement.
Assessment for Restructurings Involving Real Estate
The decision concerns an issue of real estate transfer tax law that is significant for corporate restructurings. It specifies the circumstances under which the pre-retention period under § 6a GrEStG may be satisfied after a demerger even though the acquiring company itself has not yet held the interest for five years.
The following points in particular are decisive:
- There must be a taxable legal transaction, here a merger under § 1 Abs. 1 Nr. 3 Satz 1 GrEStG.
- Only the controlling undertaking and the dependent company may be involved in the transaction.
- The holding in the dependent company must have been transferred to the acquiring company as part of the demerger.
- The holding must have been the subject matter of the demerger and transfer agreement.
- The earlier holding period of the demerged company may be attributed only in this constellation.
The BFH judgment II R 5/23 was announced on 8 October 2026 together with other decisions released for publication. The BFH did not publish a separate press release on these proceedings. Until the BFH’s decision, the judgment of the FG Münster had been listed in the specialist literature as not final.
Frequently Asked Questions
What did the BFH decide in II R 5/23 on the prior holding period under § 6a GrEStG?
The BFH decided that a holding of more than five years held by the demerged company in a dependent company may be attributed to the acquiring company. The prerequisite is that this holding was the subject matter of the demerger and transfer agreement.
Why was the demerger under the UmwG decisive for § 6a GrEStG in the disputed case?
Through the demerger, the holding in the real-estate-owning GmbH was transferred to the claimant. The BFH focused on the fact that the claimant became a partial universal successor in this respect and that the earlier holding period could therefore be attributed to it.
What practical consequences does the BFH judgment II R 5/23 have for companies with real estate assets?
The decision shows that, in restructurings involving real-estate-owning companies, the allocation of holdings in the demerger and transfer agreement can be significant for § 6a GrEStG. It concerns in particular cases in which an acquiring company has itself not yet held the interest for five years.
Tax Law Advice on Restructurings
The BFH’s decision makes clear that the application of § 6a GrEStG in transformations requires a precise examination of the shareholding relationships, legal succession and contractual allocation in the transformation transaction. MTR Legal Rechtsanwälte advises companies, investors and high-net-worth private individuals on tax law issues in connection with restructurings, shareholdings and real-estate-owning companies. Further information can be found at Legal advice in tax law.
