Tax advice for buyers and sellers of commercial real estate
Are you planning to purchase a large commercial property? In addition to selecting a suitable property, a number of legal and tax issues need to be clarified in advance.
Asset deal or share deal?
It is not only important for taxation purposes whether an asset deal or a share deal is made. It is also important to check whether real estate transfer tax can be avoided or reduced. There are also tax pitfalls to consider in the purchase agreement. We are also happy to provide support in drafting tax-related contracts and in contract negotiations.
Due diligence helps to identify tax risks and, if necessary, avoid them or take advantage of opportunities. The purchase price must be allocated appropriately to the tangible assets and goodwill, as this has an impact on subsequent depreciation and amortization. Are retentions and provisions to be formed for risk positions? It must be checked whether there is a non-taxable sale of the business as a whole or whether VAT must be paid on the purchase price. We will be happy to check the balance sheets at the reporting date, which are decisive for determining the purchase price.
The exit strategy must be planned at the time of purchase so that a reasonable profit remains from a large profit after deduction of taxes.
Owners or real estate abroad: Pay attention to international tax law!
If the owners are based abroad or the properties are located abroad, international tax law must be observed. From a German perspective, holding companies abroad are only considered for tax purposes if they have sufficient substance, i.e. if they maintain their own business operations with an office, office equipment and their own staff.
As the Panama or Pandora Papers have shown, a virtual office with a lawyer or tax advisor in a low-tax country or a letterbox is generally not sufficient.
Otherwise, you will be considered transparent for tax purposes and the holding company will be looked through to the actual beneficial owner.
In this case, the beneficial owner could be subject to limited income tax liability in Germany, even though he neither has a residence in Germany nor regularly resides here and only indirectly owns assets in Germany.
Gift and inheritance tax declarations
If assets are transferred during your lifetime or in the event of death, property values must be determined in accordance with tax regulations and gift or inheritance tax declarations must be submitted.
When restructuring a real estate group, it must be ensured that hidden reserves are not unintentionally disclosed or that real estate transfer tax is not incurred.
Foreign corporations with real estate holdings in Germany – even a small office can be a big mistake for tax purposes to destroy the NO-PE structure.
Foreign corporations with real estate holdings in Germany are only subject to limited tax liability here if the business is conducted from the foreign registered office. These are also referred to as no-PE structures, whose tax burden in Germany is then only 15.825%. This means that the profits are not subject to trade tax and are not subject to double-entry bookkeeping in Germany.
However, small mistakes such as a small office in Germany, the identity of the management bodies, sustained monitoring measures on site or incorrectly drafted service contracts quickly lead to trade tax liability.
Numerous real estate buyers and sellers benefit from our experience, especially in connection with international tax law.
Get in touch with us.
Tax advice for real estate management companies
Property managers have a responsible job. Mistakes, especially in the area of VAT and land transfer tax, are expensive and prone to liability. Diligence and knowledge of current regulations are essential. It is therefore advisable to work with specialists in tax and accounting matters.
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- Final theses
- Financial and asset accounting including preparation of various evaluations
- Preparation of interim financial statements and reports
- Preparation of annual financial statements (balance sheet and income statement, notes)
- Development of a tax balance sheet from the commercial balance sheet or derivation of the tax result from the commercial balance sheet result
- Preparation of tax returns and review of all tax assessments
- Determination of special operating income and expenses and preparation of special and supplementary balance sheets for partnerships
- Advising on or auditing compliance management systems, internal control systems, risk management systems and internal auditing
- Handling all communication with the tax authorities
- Participation and representation in external audits
- Representation in other cases (e.g. before tax courts)
- Other business and tax advice, e.g. advice on financing, purchasing or leasing
- Audit-related advice on real estate-specific accounting / financial reporting issues
- Calculation of interest expenses and preparation of loan overviews for bank and shareholder loans so that you also have an overview of the actual financial situation during the year
Tax advice for buyers, sellers and managers of commercial real estate.
Alternatively, you can also reach us by telephone on +49-69-2562 2760.
