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Taxes on Property

Information about the taxes incurred when buying or selling a property in Germany...

Buying an apartment in a city in Germany is attractive to many expatriates. Prices are lower than elsewhere and many speculate on an increase in value. Apart from that, buying instead of renting allows for the potential to sell or let. Property acquisition should always be carried out using a lawyer or advisor as there are tax burdens to minimise.

Property Transfer Tax (Grunderwerbsteuer)

The acquisition of real property in Germany is taxed. A property transfer tax is levied on any transfer – the most prominent case is a sale. The tax rate differs from region to region. More attractive regions have higher rates. Normally the tax rate is between 2.5% and 6.5% of the agreed and notarised price. The tax is due after acquisition.

In order to minimise the tax rate, the price of the apartment will be apportioned to the real property itself and the interiors (which are sold separately), with the latter remaining untaxed. If the real property is deemed to be an investment, the acquisition price, the property transfer tax and all expenditures are the basis for depreciations which will lower the payable tax.

A German notary is obliged to notify the tax authorities if a transfer of property takes place.

The property transfer tax is owed by both seller and buyer, but normally the sale agreement will oblige the buyer to pay it. The tax is due one month after the tax assessment.

Property Tax (Gewerbesteuer)

Real property is also taxed with a property tax that differs regionally. It resembles a wealth tax.

Income from Properties

Rental income from real property which is considered an investment falls under income tax. There are multiple costs which can be deducted from the income.

Disclaimer: Tax law is a complex matter. Any information provided on this website is intended as a summary and not to be more than a general overview. A specific client-advisor relationship does not arise from any information shown herein. Neither the author nor the publisher are responsible for any liability, especially for actions taken on the basis of information contained in this summary, nor for any errors, omissions etc. This text is not intended to render legal, accounting or tax advice.

Due to the complexity of tax law in any country and especially the interaction of multiple tax systems it is always recommended and encouraged to seek professional advice concerning specific matters before making any decision.

Information provided by Stein & Partners LLP - Legal and Tax Advisory
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