Real Estate Investment Trusts in Germany

Updated on Thursday 22nd September 2016

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Real estate investment trusts (REIT) are vehicles dedicated to investments in the real estate market, which can also include mortgages investments. They are created in such a manner that they will provide the highest return on investment (in the form of dividends) to its shareholders. When registering a REIT in Germany, investors should know that such vehicles have a special statute in terms of taxation, receiving many incentives on which our German law firm can provide more details.

Legislation referring to German REITs

The REITs were introduced on the German market in 2007, when the local authorities enforced the Act for the Creation of German Real Estate Stock Corporations with Publicly Listed Shares. The Act became effective starting with 1st of January 2007.

One of the main conditions to qualify as a German REIT is to list the respective investment vehicle on a regulated market. Such entities must have at least 75% of their assets invested on the real estate market.

The REITs in Germany can benefit from full tax exemptions referring to the corporate tax and trade tax if their main focus is on the property market (residential or commercial) and if 90% of the entity’s profits are distributed to its investors, in the form of dividends.

The applicable legislation is also stipulating that a German REIT must have at least 100 shareholders and there are special conditions applying in this situation, such as matters referring to ownership, on which our team of attorneys in Germany can offer in-depth information. For example, the REIT law specifies that a shareholder can’t own more than 10% of the company’s assets.

Taxation of a REIT in Germany

Although the REIT is not directly taxed for its income, the German law provides a withholding tax available for the shareholders, which are imposed with a 26,375% withholding tax on dividends. Non-resident investors acting as shareholders are taxed under the German taxation system, which means that they will be taxed on their earnings at source.

Businessmen interested in finding out more details on the real estate investment trusts in Germany are invited to contact our German lawyers for legal counselling.