Tax overview

Tax regime:

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 an investor of a single property in Berlin, it is preferable to invest as an individual rather than setting up (or using) a company to invest in the property. As an individual you are required to pay tax on the rental income. The amount of tax depends on a sliding scale which starts around 25% and goes up to 42%, to which "Soli", a special tax of 5.5% on the taxable amount has to be added. "Soli" is an extra tax based on the tax you pay, which is meant for the rebuilding of the eastern part of Germany. Depreciation, interest and advertising or management expenses can be deducted. Any private person who is receiving rental income in Germany, even if not living in Germany, must fill in and sign his annual "Steuererklärung für beschränkt Steuerpflichtige", which is a special tax declaration sheet for people who are not paying their normal income tax in Germany. The effects this has upon a person's tax duties in his/her home country must be checked there with a competent advisor.
Please note that if a foreign company which is non-resident in Germany purchases and rents out property, the tax issues are different, and if this is the case we strongly suggest you consult a specialist in German tax laws to determine what you would be required to pay and we can assist you with this.

Real estate tax is due on a yearly basis, payable in quarterly installments. It is calculated on the basis of an assessed value, laid out by tax laws, which is in every German city different

Capital gains tax:
Currently, the law provides that if you sell within a period of ten years from purchase date, the capital gain is taxed. (companies and individuals)

As per the current regulations, for individuals ONLY the profit is tax-free after the ten year holding period (this applies for a maximum of three properties per individual).
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.
Please note that owner-used property can usually be sold without tax on the profit after two years.

Berlin Estates can introduce a Germany-based reliable and fluent English-speaking accountant/tax consultant for single apartment buyers and one of the big tax consultancy firms if needed for large complicated transactions.