Taxes in Germany are quite high and foreign buyers should consult a tax advisor before purchasing real estate to simplify the registration process and minimize the tax burden.

Transaction and registration taxes

Real estate purchase tax (Grunderwerbsteuer) in Germany varies from 3.5% to 6.5% depending on the federal state.

Real estate purchase tax, %

Baden-
Württemberg
5.0
Bavaria 3.5
Berlin 6.0
Brandenburg 5.0
Bremen 5.0
Hamburg 4.5
Hessen 6.0
Lower Saxony 5.0
Mecklenburg-
Western Pomerania
5.0
North
Rhine-Westphalia
6.5
Rhineland-
Palatinate
5.0
Saarland 6.5
Saxony 3.5
Saxony-Anhalt 5.0
Schleswig-Holstein 6.5
Thuringia 5.0

Notary fees on property sales are 1% of the value. There is another fee of 0.5% for updating the cadastral register. VAT is not charged on real estate purchases.

Ownership taxes

Annual real estate tax (Grundsteuer) is calculated as follows: 0.35% of the appraised value multiplied by the local coefficient, which varies from 4.40 to 8.10. On average, this tax is about 0.2% of the property value as per the official purchase contract.

The appraised value refers to the tax (not market) value of the land on which the real estate is situated. For apartments it is the value of a proportion of the land beneath the apartment building. The appraised value is affected by a number of factors including the type of real estate, surface area, location, etc. For example, if the appraised value of a Berlin apartment is €20,000, the owner will pay €567 annual real estate tax (20,000 × 0.0035 × 8.1 = 567).

Capital gains and inheritance taxes

Capital gains tax (Kapitalertragsteuer) is payable upon sale of real estate. Individuals are charged a progressive rate up to 45% (47.475% incl. solidarity surcharge) on profits from the sale of real estate held for less than 10 years. Companies are charged 15% (15.825% incl. solidarity surcharge) on the profits of any real estate they sell.

Inheritance tax (Erbschaftssteuer) varies depending on the degree of relation: up to 30% for spouses, children and parents (in case of death), up to 43% for parents (in other cases), brothers and sisters, and grandchildren and 50% for all other persons. There are tax allowances from €20,000 to €500,000 (€2,000 for non-residents) depending on the degree of relation.

Income tax

Income tax (Einkommensteuer) ranges from 0% to 45%. This tax is also charged on income from renting out real estate. The German tax authorities have an online calculator for income tax.

Income tax 2015

Income, EUR Rate, %
Under 8,354 0
Under 16,708 0*
8,355–52,821 14
16,709–105,763 14*
52,822–250,730 42
105,764–501,460 42*
Over 250,730 45
Over 501,460 45*
* For married couples with common income

On top of income tax, the following charges are also deducted from salaries in Germany:

  • pension insurance (Rentenversicherung) — 19.9%
  • medical insurance (Krankenversicherung) — 14.25% on average
  • unemployment insurance (Arbeitslosenversicherung) — 4.2%
  • disability insurance (Pflegeversicherung) — 1.7%
  • additional fee for childless employees (Kinderloszuschlag) — 0.25%

Half of these contributions are paid by the employer and the rest are covered by the employee. Social contributions amount to 20% of a salary on average.

Corporate taxes

Trade tax on commercial and manufacturing activity (Gewerbesteuer) is 14–17,15%. Companies managing their own assets and which do not engage in any other activities are exempt.

Solidarity surcharge (Solidaritätszuschlag) is 0.825%.

Corporate tax (Körperschaftssteuer) is 15%.

Additional taxes and costs

Maintenance costs (utility bills, management company fees, tax advisory fees), interest if the property is financed with borrowed capital, land tax and depreciation (2.0–2.5% p.a. for residential property, 3.0% for non-residential property) are deducted from income tax. Companies also deduct the director’s salary and social charges.

There is also a voluntary church tax (Kirchensteuer) payable by members of a church (religious community). The rates are 8–9%. Atheists and members of other religious communities do not pay this tax. Religious affiliation or absence of such is registered with the local authorities.

Disclaimer: the information in the above article is for reference and may be subject to change over time. Persons interested in exact calculations should contact a certified tax specialist in this country before purchasing property.

 
 
Free advice on real estate in Germany
Alexander Hincu
Property Advisor
+44 20 3608 1267
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