Tax Implications for Non Resident Investors in Germany
The advice detailed below applies to non resident
individuals who have purchased German residential property
and whose sole income in Germany is derived from rental
income or gains on the sale of real estate.
Real Estate Transfer Tax
The transfer of German real estate is subject to the
real estate transfer tax (Grunderwerbsteuer), levied at
4.5% in Berlin and 3.5% elsewhere in Germany. The tax is
generally imposed on any obligation to transfer, sell,
or exchange real estate. The taxable base is the
transfer value of the real estate (e.g. the purchase
price).
Ground Tax
Real estate is subject to a local real estate tax (Grundsteuer),
levied annually. It is deductible in calculating the net
taxable income from real estate for income and
corporation tax purposes. The taxable base is the
“assessed value” (Einheitswert), which is generally
about 10% to 20% of the fair market value. The basic
rate of the real estate tax is 0.35%, but different
rates (0.26% to 0.60%) apply to specific types of real
estate.
Income Tax
Investors are liable in Germany to income tax on
rental income and on chargeable gains made on disposal
of German real estate.
EU residents are taxed on rental income using
progressive rates of between 15% and 42%.
Income tax rates for non-EU residents are 25% up to
approx. €25,000 and thereafter progressive rates of up
to 42%.
Capital Gains
Germany has no specific capital gains tax. As such,
gains on the disposal of property are subject to income
tax at the same rates as rental income.
However , under current German law, if real estate is
owned for at least ten years then no German income tax
is payable on the capital gain.
Inheritance Tax (IHT) / Capital Acquisitions Tax (CAT)
Inheritance and/or gift tax is chargeable to the
recipient of the gift or bequest of German real estate.
The tax rates range between 7% and 29% and are based
upon the relationship to the property owner and the
value attributed to the property.
Double Taxation Treaties.
Germany has extensive double taxation treaties with
many countries, including the UK, to ensure that income
and gains are not taxed twice.
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