Issue 13

Anyone who buys home ownership has to pay a tidy sum of real estate transfer tax to the state. Many do not know that this tax does not apply to the sale of a property to family members.

Anyone who buys land, a house or an apartment in Germany has to pay real estate transfer tax. North Rhine-Westphalia has the highest tax rate within Germany at 6.5 percent. With today’s property prices, there is a tax of 25,000 euros and more. Happy is the one who doesn’t have to pay this tax. If, for example, property or real estate sales are pending within the family, the real estate transfer tax usually does not apply.

No tax on children, spouses and life partners

In general, it can be said that when selling to people in a straight line together are related, no property transfer tax has to be paid. This applies, for example, to the sale of parents to children or grandparents to grandchildren.

If a property belonging to the estate is acquired, for example by a community of heirs, there is also no real estate transfer tax under the law. This also applies if the house is sold to the spouse or life partner. Even after a separation or divorce, the purchase of real estate by the former spouse is exempt from real estate transfer tax in the context of the property dispute.

Acquisition of real estate in the event of the death of a relative or a gift among the living within the meaning of the inheritance tax and gift tax law is also exempt from real estate transfer tax. This applies even if there is no inheritance or gift tax due to the personal allowances.

Exceptions between siblings

But there are exceptions, says Stephan Dingler, legal advisor at the Association for Home Ownership NRW e.V. Because sales between siblings are exempt from the tax exemption, since according to the German Civil Code they are not related in a straight line. Siblings are a so-called sideline within their own family tree. In the past, this fact has repeatedly caused incomprehension and confusion. But there could be a change soon.

Possible law change when selling to siblings

The Federal Finance Court is currently dealing with the question of whether or not in the future siblings can be exempted from the real estate transfer tax when they are sold (file number II R 49/14). In the present dispute, the plaintiff insists that siblings can be exempt from real estate transfer tax to acquire a co-ownership share in a property. Because in his opinion, the sideline within the family association must not be financially disadvantaged. This is exactly the case due to the current case law.

According to Stephan Dingler, the chances are good that the plaintiff can achieve an interpretation of the exemption regulation in his favor despite the clear wording of the property transfer tax law. If this happens, this of course has far-reaching consequences consequences, because in that case there would be practically a comprehensive exemption from real estate transfer tax on sales within a family group. The Association for Home Ownership will continue to monitor the topic and provide information accordingly.


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Christina Cherry
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