ECJ: Real estate transfer tax unjustified in restructurings involving property companies
A European Court of Justice ruling prohibits real estate transfer tax in certain corporate restructurings, particularly concerning companies owning property.
Luxembourg. A judgment by the European Court of Justice (ECJ) on June 4, 2024 (Case C-837/24) calls into question the application of German real estate transfer tax in certain corporate restructurings, particularly those involving property-owning companies.
The case concerned a Portuguese scenario where a new holding company was established as part of a corporate reorganization. Its capital was entirely raised through in-kind contributions of shares held in other companies, one of which owned real estate. Portuguese tax authorities imposed a real estate transfer tax, known as "IMT", on this transfer of assets.
The ECJ stated that the Capital Companies Directive (2008/7/EC) prohibits member states from levying certain indirect taxes on corporate operations like capital contributions and reorganizations. The court rejected arguments from Portugal and Germany that the taxable event was the economic transfer of the property, not the transfer of shares.
Furthermore, the court determined that the exceptions allowed by the directive were not applicable. The restructuring was not considered a direct transfer of securities or property ownership. A general application of the tax to prevent tax avoidance was also deemed disproportionate as it did not target specific instances of abuse. Consequently, the directive does not permit such national taxation.