Foreign entities must report ownership of German property
Germany enacted the Sanctions Enforcement Act II. The Act not only introduces a dedicated law for the enforcement of sanctions, it also amends several other laws, in particular the anti-money laundering law. In particular, the scope of the Transparency Register has been extended.
The Sanctions Enforcement Act I, which took effect in May 2022, provided the legal basis for short-term enforcement measures, including new powers for investigating and freezing assets. The Sanctions Enforcement Act II now aims to make structural improvements to the operative implementation of sanctions and anti-money laundering measures.
The Transparency Register (Transparenzregister) collects information on the ultimate beneficial owners (UBOs) of companies to disclose money laundering risks. UBOs are all individuals who, directly or indirectly, hold more than 25% of the capital stock, control more than 25% of the voting rights or control companies in a comparable manner. If these individuals cannot be identified - either because there is no such individual or because even after conducting extensive research the company cannot verify the existence of such an individual - the legal representative or the managing partner will be registered as the UBO.
Until now, foreign companies were only obliged to register when they acquired real property in Germany, be it through an asset or through a share deal. It was revealed that few real-estate companies are registered in the transparency register. Moreover, company-related changes (such as changes of name, mergers and acquisitions, ...) are often not reported to the German land registry offices (Grundbücher) so that searches regularly lead to dead ends. The new Act extends the reporting obligation to existing property.
Foreign companies that hold German property must now register their current beneficial ownership in the Transparency Register. The deadline for registering pre-existing property interests on the transparency register is 31 June 2023. There is an exemption for foreign entities that are registered in a transparency register of another EU Member State.
As of January 2023, newly established companies nominating a legal representative or partner have to indicate whether no individual fulfils the requirements to be UBO or if the company does not have enough information to identify a real UBO. From 2024, this will also apply to all civil-law associations on registration. This new reporting obligation is intended to put financial institutions in a better position to take a risk-adequate approach to the unknown UBO situation.