If a property is transferred to a GmbH or a GmbH & Co. KG through a conversion, property acquisition tax is often incurred. In particular, in the case of a merger as well as in the case of a division or transfer, the real estate transfer tax is to be expected. If, on the other hand, a company is converted by a change of legal form, this does not trigger a real estate transfer tax.
In the video we explain how you can avoid this tax by using a partnership and changing form into a GmbH.
1st real estate transfer tax
As is well known, the general legal provisions on real estate transfer tax are enshrined in the Real Estate Transfer Tax Act. However, these also apply to the conversion of a company. Thus, transfers of land where there is a legal succession generally have the effect of triggering a real estate transfer tax.
2. real estate transfer tax on the conversion of a company
2.1 Change of legal form of a company (for example GmbH in GmbH & Co. KG)
For certain reasons, a company can benefit from changing its corporate form. For example, this may be the case in certain situations at a GmbH that seeks a conversion by change of form into a GmbH & Co. KG in order to prevent a hidden distribution of profits in the salaries of the managing director. Often, however, the conversion of a sole proprietorship or partnership into a corporation is also desired, if this is advantageous in taxation or for other reasons. For example, the conversion of a single company into a GmbH is recommended when it comes to reducing the risk of liability. Incidentally, this also reduces the tax burden of the entrepreneur.
Since such a change of legal form is merely a change from one form of company to another form of one and the same company, no transfer of land takes place. Ergo also does not incur any real estate transfer tax on the conversion by change of form.
2.2. Mergers of limited liability companies and partnerships
On the other hand, the transfer of immovable property in the case of a merger of companies actually constitutes a transfer within the meaning of the real estate transfer tax law. Thus, in principle, real estate transfer tax is to be expected. The three main types of merger from the point of view of the Property Transfer Tax Act are:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.