Real estate purchase tax 3.5–6.5% of the property value Real estate tax €600–1,200 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.

Purchase

Upon closing a transaction, the buyer pays a one-time real estate purchase tax (Grunderwerbsteuer). Its rate varies from 3.5% to 6.5% of the property value under the sales agreement, depending on the federal state. If the owner's parent, spouse or child buys the property, they are exempted from paying the tax.

Real estate purchase tax in Germany
(% of the property value)

Brandenburg, North Rhine-Westphalia,
Saarland, Schleswig-Holstein
6.5
Berlin, Hessen 6.0
Baden-Württemberg, Bremen,
Lower Saxony, Mecklenburg-Western Pomerania,
Rhineland-Palatinate, Saxony-Anhalt, Thuringia
5.0
Hamburg 4.5
Bavaria, Saxony 3.5
Sofia Bulanova
Sofia Bulanova Sales Manager – Germany, Tranio

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.

Ownership

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 pay €600 to €1,200 per annum on average, which is less than the rest of Europe.

Ekaterina Shabalina
Ekaterina Shabalina Lawyer, Tranio

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.

Lease

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 the owner´s income value at a progressive rate from 14.77% to 47.475%, including a solidarity surcharge (Solidaritätszuschlag).

Income tax rates for non-residents in Germany

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 (2–3% of the building's value per annum).

George Kachmazov
George Kachmazov Managing Partner, Tranio

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 years of 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 (the list of the countries with such agreements can be found here.

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.

Sale

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 (14.77–47.475%) and on legal entities at the corporate tax rate (15.825%). The tax base is calculated as follows: purchase and depreciation expenses are deducted from the proceeds of the sale.

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 the property's market value. the tax rate ranges from 7% to 50% depending on the degree of relation and the property's value. Taxpayers fall into three classes with tax allowances reducing the tax base provided for each of them.

Inheritance and gift tax
classes and allowance

Tax
class
Recipient Tax
allowance (€)
1 Spouses and common-law partners
Children and grandchildren (with deceased parents)
Children and grandchildren (with living parents)
Parents and grandparents
500,000
400,000
200,000
100,000
2 Brothers and sisters
Nephews and nieces
Adoptive parents
Relatives by marriage
Divorced spouses and partners
20,000
3 Others, including legal entities 20,000
 
 
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Alexandru-Viorel Hincu
Property Advisor
+44 20 3608 1267
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