BUYING AND SELLING REAL ESTATE

Transfer tax
Transfer of German property is subject to a transfer tax (Grunderwerbsteuer) – equivalent of
stamp duty. Effective 1 January 2007 this tax is no longer set at federal level and comes under
authority of local governments. While most states and cities have so far kept the transfer tax at
the previous rate of 3.5% (of the purchase price), Berlin has increased the rate to 4.5%. Transfer
tax is generally paid by the buyer.
Capital gains
Currently profits made on sales of properties held as a private asset are not taxed if the property
has been held for over 10 years. However, there are plans to introduce a (20%) capital gains tax
in the coming years. If a property has been held for less than 10 years capital gains are taxed as
income (progressive tax rates).
MOST COMMON LEGAL FORMS
Property investors typically choose one of the following legal forms in which to own German
real estate: individual ownership, partnership under civil code, limited company. A partnership
is not taxed as a separate legal entity, each partner is liable to pay tax on his share of income
from the property according to his individual tax status. While a partnership is easy to establish
and handle, a limited company will, due to the formal procedures, incur higher costs (of notaries,
accounting) and commercial tax obligations.
NOTES
Germany has concluded double tax treaties with all of world’s developed economies.
Sources: PriceWaterhouseCoopers; Stb D. Roth; Bundesfinanzministerium