Having a stable economy and property prices, Germany is a good place to invest in – especially in real estate. Germany, having one of the most complex tax laws in the world, you’ll have a few transactional cost as well as taxes while buying and selling real estate.
Buying real estate
One off cost while buying will involve:
- Land Transfer Tax
- Broker’s Commission (if involved)
- Notary and registration charges
Property transfer tax (Grunderwerbsteuer)
While buying a property in Germany, you’ll be asked to pay a one-off land transfer tax (German: Grunderwerbsteuer). The tax is calculated based on the purchase price of the property – excluding any inventory which was part of the deal and has been mentioned with a pricetag in the purchase agreement. The tax rate ranges from 3.5% to 6.5% of the purchase price – depending on the state the property is.
In most cases, banks will not finance this amount and needs to be brought in as part of the downpayment.
If you are using a broker to facilitate the purchase, he’ll be charging you anywhere between % (for new construction properties) to 7.14% of the property value. In most cases we see 3.57% being paid; i.e. 3% + VAT. The cost of the broker needs to be split (in most cases) evenly by buyer and the seller – hence whatever you are paying, the seller is paying as well.
Notary and registration charges
Notary and registration charges amount to 1.5-2% of the purchase price – depending how much loan you take. Notary charges are equal at all notaries based on law.
Selling real estate
Apart from the brokers’ commission, as mentioned above, you may be subject to capital gain taxes:
Capital gains tax
German term is Spekulationssteuer and will be based on your current tax bracket. Here’s a huge – money saving distinction!
Own use: if you used the property for your own the last two years prior to selling, there will not be any capital gain taxes levied.
Investment: if you bought the property and rented it out, you’ll need to hold the property for 10years to NOT be levied with the capital gain taxes.
Can I save taxes in Germany
by buying a property?
You can save taxes if you buy real estate in Germany. I am not a tax consultant (and don’t want to become one either), so in case of a doubt: check in with a professional tax consultant if you’re basing your purchase / sale on this article 😉 – he’ll be able to guide you more specifically and according to your aligned strategy.
Property Tax (Grundsteuer)
Property tax, which is paid on a quarterly basis, is a tax on the value of real estate. The tax rate is different from state to state and will be revised in 2025.
Own use: no deduction possible
Rented: It will increase your taxable income and reduce it at the same time making the property tax a +- 0 game. You pass on the cost to the tenant as part of the ancillary cost and pay the exact same amount to the Govt.
Interest of the home loan
If you take a home loan to finance your property, the interest paid can be deducted from your taxable income whil efiling your taxes (art of the addendum V+V)
Depreciation is a tax deduction that will allow you to write off the cost of your property over a period of several years – typically 50 years, leading to a depreciation of 2% p.a. The 2% will be based on the building value (= property value PLUS land transfer tax PLUS broker’s commission PLUS parts of the notary and registration fee MINUS plot value). There are exceptions: e.g. new built properties and properties with a reduced lifespan.
Video for landlords
Here’s a link to a video explaining how taxes for landlords can be calculated: