Changes to the Transparency Register

Extension of the reporting obligations for companies domiciled abroad: The beneficial owners must now also be registered with regard to existing properties - the legislator has set a deadline of 30 June 2023 for this!

The new Sanctions Enforcement Act II (Sanktionsdurchsetzungsgesetz II) came into force on 28 December 2022. Its primary objective is to combat financial crime, especially money laundering, even more intensively. Several new mechanisms were implemented for this purpose.

Among other things, the Sanctions Act II establishes a central office for sanctions enforcement. This will transfer the competences for determining and securing assets from the Länder to the Federal Government so that the latter can control the enforcement of sanctions for Germany as a whole across all areas. One concrete task of this central office will be to establish a register of assets of sanctioned persons and partnerships.

Above all, more transparency is to be created in the real estate sector. For this purpose, a system will be introduced that will enable nationwide electronic querying of land registers.

In addition to the new introduction of Section 16a GwG, which prohibits cash payments (including cash, cryptocurrencies, gold, platinum and precious stones) for legal transactions in connection with the acquisition of real estate from 1 April 2023, the new regulation on linking real estate ownership to the transparency register is likely to be of particular interest to companies: Section 20 Para. 1 sentence 2 GwG now provides that foreign companies are not only obliged to report to the transparency register when acquiring new real estate - as has already been the case since 1 January 2020 - but also in the case of existing real estate.

In addition to (new) acquisitions, foreign companies must now also report their beneficial owners to the German Transparency Register if:

• foreign companies have become (direct) owners of real estate located in Germany since before 1 January 2020,
• foreign companies had acquired shares in real estate within the meaning of section 1 para 3 of the Real Estate Transfer Tax Act (Grunderwerbsteuergesetz / GrEStG) before 1 August 2021, or
• foreign companies had acquired an economic interest of at least 90% in a company whose assets include domestic real estate within the meaning of section 1 para 3a of the GrEStG before 1 August 2021.

The legislator sets a deadline of 30 June 2023 for the "subsequent registration" of beneficial owners in relation to the aforementioned cases (in the form of Section 19 para 1 of the GwG). Failure to meet the deadline may result in fines!

However, the obligation to report does not apply if the foreign company has already transmitted the necessary information described to another register of a member state in the EU.

Entrepreneurs should therefore urgently check whether they or their foreign shareholders are subject to a reporting obligation under these new legal requirements. If this is the case, it should also be checked whether the foreign shareholder has already fulfilled his reporting obligation in a foreign register in order to avoid the payment of fines.