F.A.Q.

 

Frequently Asked Questions / Commercial Properties

 

If I am not a German national or a German company; can I buy without restrictions in Germany?

Yes. Anyone with the necessary funds and a valid passport can buy and own property in Germany. A company should provide full disclosure and details about the shareholders and directors.

What are the purchasing costs when buying property in Germany?

In Germany, the buyer has the following purchase costs when buying property:

Property Acquisition Tax (Grunderwerbssteuer"): In Germany, the Property Acquisition Tax is not the same in all States, so it varies from 3.5% to 6.5% depending on the State where the property is located. In Berlin, as of January 1st 2014, this is 6% of the purchase price. Due to pay about four weeks after the notary deed has been signed by the buyer and the seller.

Notary fees: These are about 1% - 1.3% of the purchase price. Property registration fees at the Land registry office are between 0.5 - 1%.

If financing is needed, there may also be fees from the bank for the mortgage, plus any additional notary and registration fees for that mortgage. Any mortgage, needs to be secured in the land registry (Grundbuch) and that can only be done by a notary public.

Legal representation: Legal fees depend on the property type, size and complexity of the agreement. A legal due diligence is necessary when purchasing commercial properties. As a rule of thumb, one can estimate legal fees ranging from 0.7%-1.2% for large transactions.

At the notary date, the real estate agent's or broker's commission has to be paid. This fee again depends, but it is usually 5.95% of the purchase price, including value added tax (VAT). However, it could vary from 1.78% - 7.14% depending on the specific property and cooperating agent.

As a general rule of thumb, the total fees on top of the purchase price are approximately 12%-14%.

What are the costs of owning property in Germany?

Property tax (Grundsteuer): This is a tax that needs to be paid quarterly by anyone owning a property in Germany. This is usually a low amount and is different from town-to-town and depending on many parameters, like size of property, location, type of property, etc.

If the building is residential then the tenants pay most of the commonhold expenses, but the owner would have to pay a small percentage of these (around 15%), which also vary from building to building. The exact amount will be clarified during the due diligence process.

A company or individual owning a property, earning income in Germany, needs to make an annual tax declaration to the German authorities. A German accounting/tax consultancy firm would be doing this and the cost will depend on the property and income generated, as well as any complexities in the ownership structure.

For the management of the building, a local management company should be appointed to deal with all day-to-day issues. The cost would be around 3%-6% depending on the building and type of management required.

What are the tax implications during the rental period?

As the taxation laws are very complicated in Germany, each single case should be studied and examined carefully with a tax advisor. It seems that in general, for a large property, it is preferable to invest using a German company, which would be owned directly by the shareholders or by a foreign company. The German company would have to pay tax on the rental income. The amount of income tax is at around 15%. An extra 15% trade tax could also be charged, if the company has a permanent establishment in Germany, so advice by a German tax consultant, should be provided to avoid this, as well as other possible negative tax implications.

The effects that German taxation has upon a company’s or individual’s tax duties in their home country, must be checked at the home country with an expert international tax advisor.

We strongly suggest you consult a specialist in German tax laws to determine how a company is set-up and structure the purchase of the property in the most tax efficient way.
For property transactions involving foreign companies/individuals, Berlin Estates can recommend and introduce you to an expert Law Firm, as well as one of the big accounting firms based in Germany.

Who will take care of the property when I am not in Germany?

A local property management company can take care of the property.

What tax do I have to pay when I sell the property?

Again, it is highly recommended to consult with a specialist tax advisor for any tax issues.

In general terms, currently, the law provides that if an individual or a company sells a property within a period of ten years from purchase date, the capital gain is taxed. After the ten-year holding period the profit is tax-free as per the current regulations for individuals.

Companies on the other hand would have to pay (at any time of selling) capital gains tax and some other taxes. These taxes are being treated as part of the normal tax regime and they are calculated accordingly.

NOTE: Tax laws, rules and regulations change from time to time so it is always recommended that you get professional tax advice from experts before committing to any purchase. We can assist you in getting this advice through our cooperating tax expert associates.

Inheritance tax

This is a subject that should be discussed with a German expert tax consultant, as the laws are very complicated and change quite often. Berlin Estates can introduce you to a specialist tax consultant who can provide all the details.