Executive summary

On 4 June 2026, the European Court of Justice (ECJ) held, in Nova Iberomoldes (C-837/24), that the Portuguese real property transfer tax (IMT, for Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is incompatible with European Union (EU) Council Directive 2008/7/EC on indirect taxes on the raising of capital, to the extent it was levied on restructurings that involve the contribution of shares in real-estate-owning companies (share-for-share exchanges). Given the structural similarities between Portuguese IMT and German real estate transfer tax (RETT), the ECJ decision is expected to have material implications for German RETT law.

Key takeaways from the judgment include:

• The ECJ classified the contribution of shares in real-estate-owning companies in exchange for shares in the acquiring company as both a capital contribution and a restructuring within the meaning of EU Council Directive 2008/7/EC (the Directive).
• Member States are generally not permitted to levy indirect taxes on such capital contributions or corporate restructurings (Art. 5 of the Directive).
• The exception for real estate transfer taxes under Art. 6(1)(b) and (c) of the Directive does not apply because ownership of the real estate was not transferred, either legally or factually.
• An economic analysis alone cannot justify treating a share transaction as a transfer of real estate.
• The goal of preventing abuse cannot justify levying IMT if the national rule relies on general presumptions and applies automatically without requiring specific indications of abuse.

The ECJ decision is likely to affect German RETT supplementary taxable events on share deals, in particular Sec. 1 para. 3 and 3a RETT Act, and possibly Sec. 1 para. 2a and 2b RETT Act.

Given that the decision is largely based on an EU directive, it is unclear whether the principles of the decision can be applied to transactions involving non-EU entities.

Portuguese law (IMT)

Under Portuguese IMT, the consolidation of at least 75% of the shares in a real-estate-owning company is treated as equivalent to a direct acquisition of the underlying real estate. In cases of share consolidation, tax is levied at rates between 1% and 8% based on the tax reference value of the real estate.

ECJ decision

Facts at issue

Nova Iberomoldes is a stock corporation newly formed in Portugal in 2019. To pay in the company's entire share capital upon incorporation, the sole shareholder contributed shares in several companies, one of which owned two Portuguese real estate properties. The Portuguese tax authorities treated this transaction as a share consolidation and taxed it accordingly, which Nova Iberomoldes asserted was not in line with EU law.

EU Council Directive concerning indirect taxes on the raising of capital

The EU Council Directive concerning indirect taxes on the raising of capital essentially provides that capital contributions and restructurings within the meaning of the Directive generally are not subject to indirect taxes.

Capital contributions pursuant to Art. 3 of the Directive include:

• Formation of a capital company
• Contributions of assets that increase the capital of a capital company
• Capital increases by contributions of any kind

Restructuring operations within the meaning of Art. 4 of the Directive include:

• The transfer of all assets and liabilities or one or more branches of activity of a capital company in exchange (at least in part) for shares in the acquiring company
• Share-for-share exchanges resulting in the acquisition of a majority of the voting rights in another capital company

Art. 5 of the Directive provides a key rule: Member States are generally not allowed to levy indirect taxes on capital contributions or corporate restructurings. The Directive allows only a limited number of specifically listed taxes to be levied, as set out in Art. 6, such as VAT and duties on the transfer of ownership of real estate located within a Member State. An exception exists for certain capital duties — indirect taxes on capital contributions that were already provided for under national law as of 1 January 2006 may continue to be levied, but the rate is capped at 1%. This exception does not apply to restructurings.

Ruling

In Nova Iberomoldes, the ECJ clarified that the EU Council Directive on indirect taxes on the raising of capital exhaustively regulates the situations in which Member States may impose such taxes, both for capital contributions and certain corporate restructurings. The ECJ classified the transaction at issue both as a capital contribution and as a restructuring: a new company was established; its share capital was funded by in-kind contributions (shares in other companies, including real-estate-owning entities); and, in return, the contributor received shares in the newly incorporated company (a share-for-share exchange). The ECJ confirmed that such restructurings are generally exempt from indirect taxes under Art. 5 of the Directive.

The ECJ also held that the exception for real estate transfer taxes under Art. 6(1)(b) and (c) did not apply because the real estate itself was not transferred. Ownership remained with the respective companies. The fact that the Portuguese tax base was calculated by reference to the value of the real estate did not change this conclusion. According to the ECJ, there was neither a legal nor factual transfer of ownership. The court explicitly rejected the view that an economic analysis alone could justify treating the transaction as a transfer of real estate.

Finally, the ECJ rejected the prevention-of-abuse argument, holding that combating tax fraud or abusive practices cannot justify the levy of IMT if the national rule relies on general presumptions, particularly when the rule applies automatically to all transfers of shares in real-estate-owning companies without requiring specific indications of abuse. Because the transaction at issue was classified as a restructuring, the court found it unnecessary to examine the transitional rule applicable to taxes levied from 1 January 2006.

Application to German RETT

Given the similarities between the Portuguese IMT and German RETT, the ECJ Decision is likely to affect supplementary taxable events in share deals. This seems particularly likely for share consolidations under Sec. 1 para. 3 and 3a RETT Act. It may also extend to transfer-based taxable events under Sec. 1 para. 2a and 2b RETT Act, especially if the facts involve in-kind contributions, intra-group contributions or similar restructurings. As a result, the German share-deal rules could well come back into focus, particularly for situations in which taxable events are linked to corporate restructurings or capital measures. In light of the ECJ decision, the current "group clause" under Sec. 6a RETT Act appears too narrow.

It is still unclear how the German legislature will react to the ECJ judgment. If the judgment applies to German RETT law, incompatibility with EU law cannot be resolved through administrative action alone; guidance from the German Federal Ministry of Finance would not be sufficient and the statutory provisions would need to be amended. At the same time, it is unclear how the tax authorities will respond in the interim. They could continue their current administrative practice or, alternatively, address the EU law conflict more directly, either by interpreting the RETT Act in line with EU law or by disregarding conflicting provisions on a case-by-case basis.

Implications

For RETT cases that are not yet final, taxpayers should consider taking a proactive approach, such as by keeping tax assessments open when possible, filing or maintaining objections and expressly referring to the EU Council Directive on indirect taxes on the raising of capital and relevant EU case law. In objection and court proceedings, consideration should be given to citing the Nova Iberomoldes judgment and asserting that similar German share-deal structures could violate EU law. Based on the primacy of EU law, domestic provisions contrary to EU law should not be applied in individual cases. Ideally, German courts interpret national law in line with EU law and, where this is not possible, provisions contrary to EU law are disregarded.

This could also require correcting positions taken by tax authorities that are not compliant with EU law (e.g., tax authorities might be compelled to amend guidance issued regarding their domestic rules). For cases that are already final, options for correction are limited, and any further steps will require careful analysis on a case-by-case basis. Moreover, it is currently unclear whether transactions involving non-EU entities can benefit from the decision and a case-by-case analysis would be needed.