A manager of a German (real estate) fund with the legal form Sondervermögen, acquired for the account of the fund all shares in a number of so-called real estate legal entities (onroerendezaakrechtspersonen).
The present case concerned the acquisition of shares in private limited companies with investment properties. Under German law, the Sondervermögen is regarded as a separate capital without legal personality that invests for the account and risk of the participants. The participants are each entitled to less than 1/3rd of the proceeds and value of the shares in the real estate companies. Consequently, a direct acquisition of the shares by the participants would not have been subject to real estate transfer tax. Earlier the Zeeland - West Brabant District Court and the ‘s-Hertogenbosch Court of Appeal ruled that no real estate transfer tax was due by the manager as the manager did not acquire an interest in the shares in the real estate companies. The State Secretary of Finance filed an appeal with the Dutch Supreme Court.
Question of law and importance
The manager acquired the legal title of the shares in the real estate companies. At dispute is whether an interest has been acquired in the real estate companies by virtue of the holding of the legal title, which is required for a taxable event for the levy of transfer tax.
Assessment by the Supreme Court
The Supreme Court ruled that the acquisition of the mere legal title of shares in real estate companies is a taxable event for transfer tax purposes.
According to the Supreme Court it was the intention of the legislator to tax acquisitions of shares in real estate companies where the acquirer obtains – by way of the shares - substantial control in the real estate company.
The introduction of the requirement that the acquirer of shares should acquire an interest in the real estate company did not change this intention, and neither did the parliamentary history in which it was clarified that the shares should represent a material, economic interest in the real estate company.
This ruling is of practical importance as the Supreme Court clarifies the scope of the taxable event in case of the acquisition of shares in real estate companies: It should be assessed whether the acquirer, by way of the acquired shares, obtains substantial control in the real estate company. The introduction in the law that the acquirer should acquire an interest, did not change this.
Also for other types of real estate funds with a separate custody entity, the outcome of these proceedings is of great importance. The acquisition of one third or more of the shares in real estate companies by fund managers or custodians is always a taxable event for transfer tax purposes.
Ruling (in Dutch): Hoge Raad 9 april 2021, zaak 20/00859, ECLI:NL:HR:2021:504