The 2016 reform of Austrian land transfer tax (Grunderwerbsteuer, GrESt) not only resulted in an increase of the tax being caused by the alteration of the assessment base. It also provided for completely new regulations for the “alternative elements” to be dealt with in a transfer of shareholdings in a company owning a property. The comparatively easy approach used previously, i.e. splitting the shares among two shareholders, does not work anymore. Although certain details had to be borne in mind also until the end of 2015, this was a comparatively easy, legal way of avoiding the land transfer tax accruing in cases of a so-called “consolidation of shares” – but now it is definitely a thing of the past. Not least during the “reorganisation season”, the traditional time at the end of the third calendar quarter for carrying out reorganisations, this leads to a great number of stumbling blocks having to be considered.

It is relatively easy to grasp that, as from the start of 2016, corporate shares held by a trustee will be attributed to the trustor even in cases where a non-tax reason for the trusteeship exists.

But this also puts trusteeships at risk that existed already before 31 December 2015. To wit: the aggregation of the shares held in trust will start already with the first transaction involving corporate shares of the property-owning company after 1 January 2016 even if that transaction does not concern the share held in trust. Thus, the previous practice of arranging trusteeships so as to ensure no land transfer tax will accrue has had its day, and existing trusteeships will be re-interpreted upon the first transaction.

Furthermore, the threshold for the consolidation of shares was lowered markedly, from 100% to 95%. Consequently, as from the beginning of 2016, not only the acquisition of land, but also transfers of shares in property-owning companies, will be subject to land transfer tax if at least 95% of all shares of the company are transferred or consolidated in the hands of one owner. This applies to companies and partnerships. Apart from the shares held in trust, the relevant addition must also include shares consolidated in the hands of one group of companies (Unternehmensgruppe) as defined in section 9 of the Austrian Corporate Income Tax Act (KStG). Also transfers within the same group (concentration and dilution) cause land transfer tax to become payable, though only on the difference from the assessment base.

Early 2016 also saw the change from the fiscal authorities examining current transactions individually to their looking at observation periods spanning several years. If shares are transferred to new shareholders within these observation periods (i.e., to shareholders that held no stake in the company’s assets at the time of the share transfer), these transfers, too, will trigger land transfer tax payments over several years upon exceeding the legal thresholds. With minor shifts of shares this fact is not identifiable prima facie and, in addition, this regulation has retroactive effect on times before 2016; therefore, lawyers have to act with utmost prudence in the respective circumstances including, above all, the current reorganisation season.

However, a detailed analysis of the land transfer tax act also reveals quite a number of practical approaches to prevent the circumstances from arising that would constitute consolidation of shares under the act, so that there should be scope for share deals in real estate transactions also in future.