36th Berlin Property Talk
Tax law for foreign property owners
Experts
Volker Mauch, Attorney at Law
Achim Amann, CEO Black Label Immobilien
When & Where
Tuesday | 13 September 20222 | 19:00 h
Live via Zoom
Buying German property continues to be attractive for foreign investors. But what tax issues need to be considered when buying a property as a non-resident?
The tax implications that generally arise when acquiring, holding and exiting a property investment are manifold: real estate transfer tax is payable on acquisition and property tax on holding the property. If properties are let, there are income tax implications, and if commercial properties are let to companies or in the case of short-term letting, VAT regulations must be observed. Inheritance or gift tax may also be payable because the transfer of German real estate generally leads to taxation in Germany.
For foreign investors, the rules of German tax law are always "in competition" with the tax law of other investment locations. Here, Germany is often more attractive than expected.
Expert of the live talk
Volker Mauch
Volker Mauch is a lawyer and founder of vpmk Attorneys at Law Legal Servicesa Berlin and Stuttgart based law firm focussing on international private clients in relation to investments, residence and work permits. Volker Mauch specialises in advising foreign private clients on their real estate investments in Berlin and has guided more than 1,000 clients through their transaction process.
Summary of the conversation:
Welcome to the 36th Berlin Property Talk.
The topic: Buying, selling and letting property in Germany as a non-resident for tax purposes. What do you need to consider if you live abroad?
Volker Mauch, what is the most important thing from a tax perspective if you own a property in Germany as a foreigner and rent it out?
As a general rule, foreigners in Germany do not pay income tax, as this depends on their place of residence and not on their nationality.
If you are subject to limited tax liability in Germany, this means that income from letting and leasing in Germany is also subject to limited tax liability - i.e. no tax-free amount, but just as progressive as it is for unlimited tax liability. It is essential to submit a tax return for limited tax liability in order to declare the amount of rental income in Germany.
If you want to sell your property in Germany, the profit must be taxed unless an exception applies.
There are 3 exceptions:
- The property must have been privately owned for at least 10 years. This means that the owner must not be a commercial property dealer (approx. 3 sales in 5 years).
- The property was used by the owner without interruption in the year of sale and in the 2 years prior to that. The years do not have to be full. The middle year does, otherwise it would not be uninterrupted, but the first and last year do not have to be full.
- The property was owner-occupied from purchase to sale.
A property is purchased from the property developer. After 2 years, the property is completed. During this time, the market value has risen by 50,000 or 100,000 euros, for example. If you don't rent out this flat and sell it after a week - what happens?
Under no circumstances should it be a pure tax model. You will certainly have to justify all sorts of reasons why you want to sell the property again after such a short time. But experience shows that the authorities deal with this in very different ways. In some cases, the reasons are not even asked because the property has not been let. But in general, there are more and more enquiries as to whether the property was actually used exclusively for own use. This tax issue with off-plan purchases does not only apply to people who live abroad. It also applies to people who buy from property developers and take the profit.
It is important to note that it is very important to contact a tax advisor if you intend to buy, sell or rent a property in Germany.
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