Real estate tax in Germany


Tax treatment in Germany

In Germany, real estate tax has quite an unusual form. That is because it is not the object, like a residential building, apartment or office itself that is taxed, but a plot of land on which this building is situated.

This peculiarity influences property taxation upon both sales and purchase.

  • If the whole building is offered for sale, like a private residence or cottage everything is usually clear, as there is only one object on the plot completely passing into the ownership.
  • In case of an apartment building, the ownership of a portion of the land plot in proportion to the apartment is transferred. The portion is calculated as a percentage.
Property tax in 2018, when collected, is transferred to the local budget. This causes a very loyal policy of city authorities regarding the developers. This circumstance also explains a substantial difference in taxation rates.

When buying or selling, there is an important issue: according to the German law, the tax is levied on the owner registered as of the beginning of the year. Is the property being sold throughout the year, one can find an agreement that the buyer returns this amount to the seller. This annual tax of about 0,0035 % of the properties worth must be paid to the local government.

But there is more to it and Mor-Shoval Consulting undertakes to clarify all issues related to purchase and sales of property.

Acquisition and sales taxes

Property acquisition tax must be paid within one month from receipt of such request from the tax office. Failure to pay makes it impossible to update the Land Register by entering information about the new owner, and it means that the owner cannot enter possession.

  • Cost of property is the starting point for tax assessment. The payer is specified in the agreement. Generally, this is a buyer, but exceptions are possible.
  • Taxation rate is different for different Federal Lands – from 3.5 to 6.5%. Essentially, it is determined by the level of region development. New German taxes do not have any impact on it.
Mor-Shoval Consulting brings the attention of its clients to the fact that both parties of the deal are responsible for payment. In the first place, the person specified in the agreement receives the request. However, if the request remains unfulfilled, revenue service addresses another party.
  • Property sales tax is accrued if the property remains in possession for less than 10 years. The rate is calculated as a difference in value as of the sales and purchase dates amounting up to 45%.