On 16 December 2016, the BaFin presented a draft of the circular relating to the investments of Solvency I insurers and pension funds for public consultation. The final version was eventually published with only minor amendments compared to the draft. However, said amendments are important for private equity funds.

For some time now, transactions of shares or partnership interests in real estate holding companies have been targeted by German legislators. Fiscal authorities estimate an income tax potential of one billion Euro per year for the German federal states as a result of a tightening of the regulations for real estate transfer tax in indirect real estate investments. Even though the current provisions differ in detail between partnerships and corporations, as a basic rule, real estate transfer tax is currently triggered if 95 per cent of the shares or partnership interests of a real estate holding company are sold. After discussing a reduction in this acquisition threshold from 95 per cent to 75 per cent, or even 50 per cent, the Conference of Ministers of Finance decided on June 21, 2018, to reduce the threshold to 90 per cent. At the same time, the existing holding periods for transfers of partnership interests, which may trigger real estate transfer tax if not met, are to be extended from 5 to 10 years in the future. Furthermore, provisions for partnerships and corporations are to be aligned more and more in the future. After the finance ministers of the federal states agreed on a fundamental concept, the Federal Ministry of Finance is now tasked with the drafting of a legislative proposal on this basis.

The German Federal Ministry of Finance published a new draft letter on the application of the Investment Tax Act 2018. In our beinformed we shed some light on the following points: Partial exemption and related notification duties of investors, eligible exchanges and other organized markets, real estate holding companies, partial exemption and foreign real estate companies, risk diversification and real estate companies, opening clause and non-eligible assets, definition of securities and transitional provisions.