|Real estate purchase tax 3.5–6.5% of the property value||Real estate tax €100–300 per annum||Capital gains tax 15–48% of the property value|
Foreign nationals pay taxes at the same rates as German residents on property purchases, ownership, lease or alienation.
Upon closing a transaction, the buyer pays
Buyers do not pay real estate purchase tax when buying shares or stocks of a company that owns property under the Share Deal scheme.
19% VAT is charged on agent and notary fees in a sales transaction.
Owners pay an annual real estate tax (Grundsteuer). The amount of tax depends on the property type, location, land plot size and time of construction. Owners of apartments pay €100 to €300 per annum on average, which is less than the rest of Europe.
Owners must pay off the real estate tax before the end of the calendar year even if their property is sold during that year. In this case, buyers usually compensate the sellers with the tax paid, proportional to the term of their effective property ownership.
Real estate owners who rent their properties out are taxed on their earnings: individuals are obliged to pay the personal income tax (Einkommensteuer), while legal entities have to pay corporate tax (Körperschaftssteuer). Income tax is calculated based on
|Tax base (€)||Rate (% of income)|
|8,821 – 54,057||14.77–43.255|
|54,058 – 256,303||44.31|
|256,304 and over||47.475|
For the companies not engaged in any other commercial activities than property lease, the income tax rate is fixed at 15.825%, including the solidarity surcharge.
What is the solidarity surcharge?
These are contributions to the economic recovery of the former German Democratic Republic. The surcharge applies to the income, corporate and capital gains taxes. It usually amounts to 5.5% of the mandatory underlying tax payment.
The income tax is levied on the margin between all the profits generated and all the expenses incurred. The latter include purchase costs, utility bills, management company fee, property tax, loan interest, land tax and building depreciation expenses
Many investors structure capital "entry" into German companies through founder loans with the assistance of qualified tax advisors, which helps to decrease the tax base significantly and exempt the profits from dividend taxation. In practice this reduces the tax burden on rental income almost to zero in the first
10–15 yearsof investment.
Depending on their country of residence, individuals who lease property in Germany do not need to pay taxes on rental income in their home country, if it does not have a double taxation agreement with Germany.
It is true that registering property to a legal entity instead of an individual helps to optimise taxation?
Indeed, according to Tranio statistics, buyers of properties over €1 million annually save 25% of their income on average when registering the property to a legal entity, as compared to registering the same property to an individual. Moreover, buyers affected by double taxation agreements can register property to legal entities or use them to take out mortgage loans to avoid paying the low interest benefit tax in their home countries.
Property sellers are obliged to pay capital gains tax (Kapitalertragsteuer), which is a type of income tax levied on individuals at the personal income tax rate
Individuals do not pay capital gains tax given if 10 years have passed since the initial purchase of the property; or in cases where the property has been used only for personal residence for at least three years before the sale.
Donation and inheritance
Inheritance and gift tax (Erbschaftsteuer und Schenkungsteuer) is payable by the property recipient. the tax base usually equals
Children and grandchildren (with deceased parents)
Children and grandchildren (with living parents)
Parents and grandparents
|2||Brothers and sisters
Nephews and nieces
Relatives by marriage
Divorced spouses and partners
|3||Others, including legal entities||20,000|