Grunderwerbsteuer is the tax on acquiring German real estate, levied at 3.5% to 6.5% of the price depending on the federal state. In our €10 million supermarket example in Lower Saxony it is the largest acquisition cost, €500,000 of €945,000 — and, as a rule, it arises at signing, not when ownership passes.
What it is
The tax arises with a purchase contract or other transaction that creates a claim to the transfer of a German plot (§ 1(1) no. 1 GrEStG). Where the contract depends on a condition or an approval, it arises when the condition is met or the approval granted (§ 14 GrEStG). Heritable building rights count as plots (§ 2(2) no. 1 GrEStG); machinery and other operating equipment (Betriebsvorrichtungen) do not (§ 2(1) sentence 2 no. 1 GrEStG). The tax base is the consideration: the purchase price including other obligations the buyer assumes (§§ 8(1), 9(1) no. 1 GrEStG). The federal rate is 3.5% (§ 11(1) GrEStG), but each state may set its own (Art. 105(2a) sentence 2 GG).
Exhibit 1. Rates range from 3.5% in Bavaria to 6.5% in four states
Buyer and seller are both liable to the tax office (§ 13 no. 1 GrEStG), although contracts normally allocate the tax to the buyer. It falls due one month after the tax assessment is notified (§ 15 GrEStG). As a rule, the buyer can be registered as owner only once the tax office certifies that no tax objection stands in the way (§ 22 GrEStG).
Why it matters to investors
On a €10 million store the tax is €350,000 in Bavaria and €650,000 in North Rhine-Westphalia: €300,000 that the location's yield must first earn back (Part 5). In an asset deal it is not deducted at once but capitalised with the price, and only the building's share is depreciated (Part 11). If a deal is unwound after signing, relief requires an application and the conditions of § 16 GrEStG, for example a cancellation agreed within two years of the tax arising and before ownership passes.
Buying the company instead of the property does not avoid the tax automatically: share deals are taxed from a 90% threshold, under rules reformed with effect from 3 July 2026 (Part 9).
What to check
• The current rate of the state where the property lies, applied to the full consideration.
• The contract's allocation of the tax, and prompt payment, because registration waits for the clearance certificate.
• Conditions precedent and approvals, which shift the date the tax arises.
• In a share deal, every 90% test and the one-month notification deadline (§ 19(3) GrEStG).
Sources: GrEStG §§ 1, 2, 8, 9, 11, 13, 14, 15, 16, 19, 22; Art. 105(2a) GG; state rate laws, as of October 2026; Gordon Real Estate Group, "German Prime Retail", Parts 5, 9 and 11. Legal position as of 10 October 2026.
Photo: Alex Block / Unsplash
This entry is general information and not legal or tax advice.