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Further tightening of reporting requirements for the German transparency register

German companies must report their beneficial owners to combat money laundering and terrorist financing. The obligation was introduced in October 2017, initially with many exceptions. It has since been continuously tightened. Another tightening is scheduled for the middle of this year, significantly expanding the reporting obligations for foreign (= non-German) companies.

Initial situation: Reporting obligation of foreign companies (only) for real estate acquisitions

Previously, the reporting obligation primarily affected German companies. Foreign companies only had to register in the transparency register if they acquired real estate in Germany. Since August 2021, they also need to register if they are indirectly involved in transactions subject to real estate transfer tax, such as share acquisitions involving real estate-owning companies. Existing real estate acquisitions were exempted from reporting requirements towards the transparency register – until now.

Reporting obligations in case of existing real estate

However, new regulations will extend reporting obligations to existing properties. The so-called Sanctions Enforcement Act II introduced a statutory regulation, requiring foreign companies to register not only when acquiring new real estate but also for existing cases.

That means: All foreign companies with direct or indirect real estate holdings relevant for real estate transfer tax purposes must generally notify the transparency register, regardless of the date of acquisition. An exception only applies if they are already registered in another EU member state’s transparency register.

All companies subject to the reporting obligation need to register their ultimate beneficial owners (UBOs). Those are individuals who hold more than 25% of shares or voting rights in the company or control it in a comparable manner. If there are no such persons, the managing directors need to be registered as fictional UBOs. Notifications should be updated in case of changes.

Transition period until June 30, 2023

Anyone affected by the new reporting requirements has time to register in the transparency register until June 30, 2023. Failure to comply may result in fines and possible publication as a "transparency offender" on the Federal Office of Administration's website. To avoid penalties, it is advisable to promptly review reporting obligations and arrange timely registrations.

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