Due to an amendment to the Anti-Money Laundering Act (GwG), foreign companies that own German real estate are obliged to register in the German Transparency Register by June 30, 2023.
Previous legal situation
Section 20 (1) cl. 2 of the GwG previously obliged foreign companies (“associations having their seat abroad”) to notify the German Transparency Register of their beneficial owners if they undertook to acquire ownership of real estate located in Germany (as well as in the case of certain share deals or legal transactions pursuant to Section 1 (3) and (3a) of the Real Estate Transfer Tax Act). Specifically, this obligation concerned the time of the conclusion of a (real estate) purchase agreement. Due to a corresponding prohibition on notarisation by the notary (Section 10 (9) cl. 4 of the GwG), the notification to the Transparency Register needed to be made prior to the conclusion of such a purchase agreement, which ensured compliance with the notification obligation.
Amendment to the law
With effect from January 1, 2023, Section 20 (1) cl. 2 of the GwG was amended by extending the notification obligation to every foreign company that holds real estate located in Germany. This obligation applies without the existence of a transaction or transfer of assets and must be fulfilled by every current foreign owner of German real estate. However, indirect owners (e.g. shareholders of real estate companies) are not affected by this obligation.
For real estate acquired since January 1, 2020, the relevant notification already had to be made in the process of the acquisition of the real estate; a renewed notification is not required in this case. It should be noted, however, that the information on the beneficial owner pursuant to Section 20 (1) cl. 1 of the GwG must also be kept up to date; if the beneficial owner of real estate changes (e.g. due to changes in the ownership structure), the notification to the Transparency Register made at the time of acquisition needs to be updated.
The situation is different for real estate acquired before January 1, 2020 (or certain share deals or legal transactions pursuant to Section 1 (3) and (3a) of the Real Estate Transfer Tax Act that took place before August 1, 2021). In these cases, the registration of the foreign company in the German Transparency Register was not yet required in the course of the acquisition of the real estate. Section 59 (13) of the GwG provides that for these cases the initial notification of the beneficial owner to the Transparency Register must be made by June 30, 2023.
Exception for companies registered in other EU countries
As in the past, the obligation does not apply to companies that have already submitted the information required under Article 1(15)(c) of Directive (EU) 2018/843 and under Section 19 (1) of the GwG to another register of a member state of the European Union. Accordingly, it is sufficient in principle that companies are registered in the transparency register of another EU member state. Since this is likely to be the case for most companies from other EU member states, the obligation under Section 20 (1) cl. 2 of the GwG primarily concerns companies from non-EU states (including former EU member states such as the United Kingdom).
Risk of Fines
A violation of the obligation to notify the German Transparency Register of the beneficial owners of these foreign real estate companies may constitute an administrative offense (Ordnungswidrigkeit) if the notification is intentionally or carelessly not made, not made correctly, not made in full or not made in time (Section 56 (1) No. 55 (d) of the GwG). The fine range is up to EUR 150,000 in the case of intent and up to EUR 100,000 in the case of carelessness. According to a decision of the Cologne Higher Regional Court (OLG Köln, decision of July 3, 2020 – docket no. 1 RBs 171/20), a careless failure to notify the Transparency Register should already be considered if the company’s management has failed to inform itself to a reasonable extent about new legal obligations. Against this background, all foreign companies that are not yet registered in an EU transparency register are advised to notify the German Transparency Register of their beneficial owners in good time.
Assistance
Do you have questions about the notification requirements or do you require assistance with notifications to the Transparency Register? Feel free to contact us!
Contact:
Patrick Braasch
Counsel
+49 (0)40 696 39 15-33
patrick.braasch@reius.de
