CJEU on Real Estate Transfer Tax in the Context of Contributions of Shares in Real Estate Companies

In its judgement in Nova Iberomoldes (C-837/24), the Court of Justice of the European Union (CJEU) addressed the question of whether Portugal may levy real estate transfer tax in connection with corporate restructurings involving contributions in kind of shares in real estate rich companies.

Background: Real Estate Transfer Tax on Share Transfers

The case concerned the incorporation of a holding company whose share capital was funded through contributions of shares in several corporations. One of these companies owned real estate located in Portugal. Under Portuguese law, the acquisition of more than 75% of the shares in a company owning real estate is treated in the same way as a direct transfer of real estate and therefore triggers real estate transfer tax.

Consequently, the Portuguese tax authorities assessed real estate transfer tax based on the value of the underlying properties, even though legal ownership of the real estate itself never changed. The taxpayer argued that this constituted a violation of the Capital Duty Directive (Council Directive 2008/7/EC).

The Capital Duty Directive Protects Corporate Restructurings

The purpose of the Capital Duty Directive is to ensure that capital contributions to and reorganizations of companies within the European Union are not burdened by indirect taxation. Transactions covered by the Directive include, in particular:

• the incorporation of capital companies through contributions in kind;
• capital increases through the contribution of assets or shareholdings;
• contributions of shares in subsidiary companies;
• mergers, demergers and certain intragroup restructurings.

CJEU Finds the Portuguese Rules Contrary to EU Law

The CJEU held that the contribution of shares constituted a qualifying restructuring transaction within the meaning of the Capital Duty Directive. Consequently, Member States are prohibited from imposing indirect taxes on such transactions.

Particularly noteworthy is the Court’s finding that the Portuguese real estate transfer tax qualifies as an indirect tax within the meaning of the Directive, notwithstanding the fact that its tax base is linked to the value of the underlying real estate. According to the Court, the decisive factor is not the tax base itself, but rather the economic connection between the tax and a restructuring transaction protected by the Directive.

The Court also rejected the applicability of the exceptions provided for in the Directive. Neither the exemption relating to taxes on transfers of securities nor that relating to property transfer taxes could apply, since no actual transfer of ownership of the real estate occurred in the case at hand. Likewise, the Court dismissed arguments based on the prevention of abuse or tax avoidance.

Relevance for Austria

The judgment is particularly significant considering Austria’s reform of the real estate transfer tax rules on share consolidations and changes of shareholders, which entered into force on 1 July 2025.

Under Section 1(3) of the Austrian Real Estate Transfer Tax Act (GrEStG), both direct and indirect share consolidations in companies owning Austrian real estate may trigger real estate transfer tax. Consequently, transactions are taxed where economic control over a real estate rich company changes, even though the real estate itself is not transferred.

The CJEU judgment raises the question of whether these Austrian provisions are compatible with EU law in situations falling within the scope of the Capital Duty Directive. In our view, the current Austrian rules may be incompatible with EU law, particularly in cases involving direct or indirect share consolidations occurring in the context of corporate reorganisations.

Although the Austrian Real Estate Transfer Tax Act provides certain exemptions for qualifying reorganisations where all parties involved belong to the same acquirer group, these exemptions apply only to a limited extent and, in our opinion, do not cover all transactions protected under the Capital Duty Directive.

Accordingly, legislative amendments appear necessary to ensure that the Austrian provisions comply with EU law.

Implications for Pending and Future Cases

For transactions that have already been completed, taxpayers should assess whether assessed or self-calculated real estate transfer tax can be challenged or reclaimed on the basis of the CJEU judgment. This is particularly relevant for share consolidations or changes of shareholders implemented as part of corporate restructurings.

Where the tax was self-assessed, taxpayers may apply for a formal assessment notice within one year pursuant to Section 201 of the Austrian Federal Fiscal Code (BAO). Such assessment notices may subsequently be challenged by way of an ordinary appeal.

For future transactions, a careful analysis should be undertaken to determine whether the transaction falls within the scope of protection of the Capital Duty Directive. In such cases, it may be advisable to file a ”zero-return”together with a disclosure letter referring to the CJEU judgment, thereby preserving the possibility of appealing against any differing tax assessment.

Conclusion

For Austria, the judgment may have far-reaching implications, particularly with regards to share consolidations occurring in the context of corporate reorganizations. Whether and to what extent the Austrian legislator will amend the existing rules remains to be seen. We will continue to monitor developments closely and report on further legislative and judicial developments.