Germany to extend non-resident capital gains taxation to shares in foreign real estate-rich corporations

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August 2018

Overview

Recently published German draft legislation would extend the German non-resident taxation rules on capital gains from disposal of shares in a German corporation to capital gains from disposal of shares in a foreign corporation that is deemed to be ‘real estate-rich.’ 

If a 100% participation exemption is deemed available for non-resident corporations, the proposed rules would be expected to affect primarily non-resident individuals and partnerships with individuals as partners.

The takeaway

Under the proposed new rules, capital gains from disposal of shares in foreign corporations with significant German real estate would be subject to German non-resident taxation. We expect the proposed rules to be of particular interest to non-resident individuals and non-resident partnerships with individuals as partners.

This proposed amendment and the contemplated amendment of the German Real Estate Transfer Tax rules for share deals (see PwC Tax Insight, June 27, 2018) indicate that the German legislature is paying particular attention to real estate-related tax matters.

Potentially affected taxpayers should monitor the legislative process.

Contact us

Thomas Loose

Partner on Secondment, PwC US

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