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Rental Income Taxes in Germany for Expats

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If you are contemplating buying a property in Germany and renting it out, you must get familiar with the expat taxes in Germany for rental income.

Apart from the rental income tax in Germany, it is essential to know about the property tax and other essential information.

If you want to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).

This isn’t formal tax, legal or financial advice, and is only written here for informational purposes.

This page will delve into:

  • Taxes in Germany
    • Property Tax Germany
    • Real estate transfer taxes in Germany
    • VAT in Germany
  • Rental Income Tax in Germany for Expats
  • Real Estate Market in Germany

Taxes in Germany

Taxes in Germany

Property Tax Germany

Property Taxes in Germany, known as Grundsteuer, applies to local real estate and undergoes a reform due to constitutional issues, effective from January 1, 2025.

Property owners must revalue their properties and submit tax value declarations by January 31, 2023.

Corporate entities face a local tax authority tax, offsettable by a trade tax deduction.

Notary services and land registration for property purchases typically cost 1.5-2%, and land register fees range from 0.8-1.2% of the property value.

Real estate Germany agent fees, shared by both buyer and seller, range from 3.5-7%.

Real Estate Transfer Taxes in Germany

Real Estate Transfer Tax in Germany (Grunderwerbsteuer) ranges from 3.5% to 6.5%.

Various federal states have different rates, and exemptions exist for specific conditions, including corporate reorganization and transfers between relatives.

VAT in Germany

VAT at 19% applies to the sale of new residential properties.

Rental Income Tax in Germany for Expats

Rental Income Tax in Germany

Income from renting out property is taxable, considering rents received minus allowable expenses.

Foreign sources are typically exempt, but if not in the EU/EEA, exemption with progression applies.

Taxation applies globally after becoming a tax resident.

Non-residents are taxed only on German-sourced rental income.

Tax rates for 2024 allow foreigners to earn up to €11,604 tax-free, increased from €10,908 in 2023.

A 5.5% solidarity surcharge is applicable, and non-resident couples are advised to file separately. Tax advisors can aid foreign property owners in the filing process.

Income tax rates for non-residents in Germany align with residents and vary based on income:

  • Below €11,604: 0%
  • €11,604 – €66,760: 14% to 42%
  • €66,760 – €277,825: 42%
  • More than €277,826: 45%

Qualified expenses for tax deductions include mortgage interest, repairs, and maintenance.

Non-resident German property owners must file taxes in both their home country and Germany, avoiding double taxation via agreements.

Germany offers a basic tax allowance for everyone, with 2024 thresholds at €11,604 for singles (up from €10,908 in 2023) and €23,208 for married couples.

Tax rates range from 14% to 45%, applicable to incomes up to €277,826 and exceeding that.

Real Estate Market in Germany

Understanding these intricacies and seeking guidance from a tax advisor can optimize tax returns, especially for landlords with multiple income sources.

Real Estate Market in Germany

To invest in real estate in Germany, you must be familiar with the real estate market in Germany.

In 2024, the real estate market in Germany is anticipated to reach an estimated US$37.70 trillion, with the residential sector dominating at US$31.26 trillion.

Forecasts suggest an annual growth rate of 3.55% (CAGR 2024-2028), projecting a market volume of US$43.35 trillion by 2028.

In comparison, China is expected to lead globally with a market value of US$135.70 trillion in 2024.

Notably, the real estate market Germany is witnessing increased demand for environmentally friendly and sustainable properties.

Pained by financial indecision? Want to invest with Adam?

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

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