Press Release: State aid: Commission prohibits real estate transfer tax exemption for housing companies in Berlin

The European Commission on 24 November 2005 decided to prohibit, under the EC Treaty rules on state aid, the implementation of a German aid scheme which foresaw to exempt housing companies in the labour market region of Berlin from the real estate transfer tax in case of mergers and acquisitions. The objective of the scheme was to redevelop the housing market in the labour market region of Berlin as this market was characterised by oversupply. However, as the scheme was not targeted at so-called ‘pockets of deprivation’ where high levels of social exclusion existed, the European Commission considered that a tax exemption covering the whole of Berlin was disproportionately wide, and the resultant distortion of competition could not be justified under the EC Treaty (Article 87).