F.A.Q.
Frequently Asked Questions
If I am not a German national can I buy without restrictions in Germany?
Yes. Anyone with the necessary funds and a valid passport can buy and own property in Germany
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 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% - 1.5% of the purchase price. Property registration at the Land registry office are between 0.6 - 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 are about 1.00-1.50% depending on the property type, size or complexity of the agreement. A lawyer is not necessary but using one is highly recommended.
At the notary date the real estate agent's or broker's commission has to be paid. This again depends but is usually 5.95% of the purchase price, including value added tax (VAT). It ranges from 3.57% - 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 15%.
What are the costs of owning property in Germany?
The costs that are to be paid are property tax - this is different from town to town but very small (between 150 Euro and 700 Euros usually for an apartment per year. This amount is usually a bit bigger for a single-house; it depends on the size of the property).
Then the building reserve fund which is mandatory when owning an apartments as part of a community; it is usually about € 0.50 to € 1.50 Euro per sqm living area per month. Garbage disposal, water, common house electricity, housekeeping, maintenance of the heating system etc. are additional costs which sum up to about € 2,00 to € 3,50 per sqm and month. All of these have to be paid by the tenant if the apartment or house is rented out.
For handling the procedures of these payments, we can introduce you to a management company that will take care of everything for a very logical monthly fee.
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 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 a special tax (Soli) of 5.5% 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 here, 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 your tax duties in your 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.
Berlin Estates can recommend a reliable and fluent English-speaking accountant/tax consultant, with whom we have been cooperating for many years.
For more complex transactions involving foreign companies structures we can introduce you to an expert legal consultant as well as one of the big accounting firms based in Berlin.
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 (this applies for up to three properties but will not apply for more than three properties).
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.
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.