GERMANY Law and Practice Contributed by: Wolfram H. Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
2.10 Taxes Applicable to a Transaction Asset deals are subject to RETT (the German Real Estate Transfer Tax), with the rate varying between 3.5% and 6.5% depending on the federal state in which the asset is located. VAT is in principle not applicable to the sale of real estate. If the property is sold B2B, the seller can waive the VAT exemption, thus VAT at 19% applies. The buyer has to pay this VAT to the tax authorities (reverse charge). If the buy - er intends to use the real estate to render non-VAT- exempt supplies, the VAT triggered may be reclaimed as input VAT; hence no VAT would actually be payable. RETT-neutral share deals were significantly impeded by the recent RETT reform. Share deals trigger RETT if at least 90% of the partnership interest/shares of a partnership/corporation holding German real estate is transferred within ten years to new partners/share - holders. In addition, RETT is triggered if at least 90% the shares in a corporation or partnership holding Ger - man real estate are directly or indirectly unified in one hand or the hands of affiliated entities. 2.11 Legal Restrictions on Foreign Investors Generally, there are no legal restrictions on foreign investors acquiring real estate in Germany. However, a notary may only notarise a real estate sale and purchase agreement with a foreign entity as the buyer and, therefore, a foreign entity can only acquire real estate in Germany if the entity is registered in the German ultimate beneficial owner register ( Transpar- enzregister ). Due to the European single market, reg - istrations in an equivalent register of an EU member state are also sufficient. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Generally, acquisitions are financed by both debt and equity, with the ratio between the two depending on the market. Equity is often provided downstream in the form of shareholder loans that are expected to be subordinated to the debt financing. If insufficient
whether they are aware of the contamination or if it was caused by them. When requesting remediation measures, the authorities act solely on the basis of the principle of effectiveness and will usually charge the most financially sound party, which is often the owner. However, the owner may take redress from the actual polluter if their actions or fault can be proved. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law A property owner has a right to a building permit if the proposed building complies with public building law. The issued building permit will ensure the legality of the building and its permitted use. Local Authorities In many areas, the general public building law is sub - stantiated in local development plans ( Bebauung- spläne ) issued by the local authorities that make pro - visions for the permitted use and size of the property. If there is no development plan, the permitted use can be determined by the Federal Building Code and the Federal Land Use Ordinance. If no local development plan exists or significant amendments are required for a development to be permitted, the owner might enter into an urban development agreement ( städtebauli- cher Vertrag ) with the local authorities with the aim of establishing/amending the project-related develop - The fundamental right to property is protected by the German constitution, which only allows the govern - ment to expropriate for public interest, if authorised by German law, for appropriate cause and against compensation. There are federal and federal state laws enabling expropriation. The procedure varies, depending on the law it is based on. Compensation is based on the market value of the property at the time of expropriation. Municipalities also have the right to expropriate, as a last resort, to fulfil their goals under the Federal Build - ing Code, especially if the real estate is located in a development area ( Entwicklungsgebiet ). ment plan to secure the building project. 2.9 Condemnation, Expropriation or Compulsory Purchase
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