Maintenance is an unavoidable expense, regardless of the country you own the property. In Germany, these costs can include taxes and fees related to real estate, insurance and direct costs for the maintenance of the housing. In addition to the tax on purchased property, which is paid once, you are must pay an annual tax on land and real estate located on that land.
The calculation of real estate taxes in Germany is the responsibility of the tax adviser. He is responsible for the correctness and reliability of the calculations.
The tax on the purchase of housing in Germany is small but the tax rate on income from resale of real estate (Spekulationssteuer) is high. Thus, the amount of the tax can reach 45% of the income from resale. That can be explained by the fact that the German authorities are trying to control the price stability and avoid possible speculation in the real estate market.
One-time tax on the purchase of real estate
One-time tax on the purchase of real estate in Germany (Grunderwerbsteuer) is 3.5 - 5% of the value of the property. The amount depends on the specific land (subject of the federal land) in which the property is located.
The base rate of the annual property tax (Grundsteuer) is 0.35% of the estimated value (Einheitswert) of the facility. As a rule, estimated value is significantly lower than the real market price. The amount of the appraised value is determined by the tax inspection (Finanzamt).
In addition, the size of the annual tax is influenced by local municipal coefficients, the size of which varies and is determined by the city authorities.
Thus, the approximate amount of the annual property tax is about 0.98 – 2.84% of the appraised value of the property. For example, the amount of tax payable for a one-room apartment in Berlin is approximately €200 per year.
For old buildings (40-50 years), it is possible to write off the tax. For houses built in 1925 and later, taxes are annually written off at a rate of 2% of the estimated value and for houses older than 1924 at a rate of 2.5%.
Taxes when renting a property
Taxes for individuals:
Income from the rental of real estate is subject to income tax. It is calculated on a progressive scale:
● Annual income up to € 8,130: 0% for residents and 14% for non-residents (foreigners without the right to permanent residence); the calculation formula is: (912.17 × Y + 1.400) × Y, where Y = (zvE – 8,130): 10.000
● income from € 8,131 to € 13.469: 14 - 23.97%; the calculation formula is: (912.17 × Y + 1.400) × Y, where Y = (zvE - 8.130): 10.000
● income from € 13,470 to € 52,881: 23.97% - 42%; the calculation formula is: (228.74 × Y + 2.397) × Y + 1.038, where Y = (zvE = 13.469): 10.000
● income from € 52,882 to € 250,730: 42%; calculation formula: 0.42 × zvE - 8.172
● income more than € 250,730: 45%; calculation formula: 0.45 × zvE - 15.694
For couples, the following rates apply:
In addition to income tax, individuals are also required to pay solidarity tax (Solidaritätszuschlag), which is a maximum of 5.5% of the income tax.
The total tax rate for individuals is about 14.5% - 47.5% of the income.
The costs for the maintenance, renovation, depreciation charges, the costs of the owner for a trip to Germany for the property inspection, and meeting with the manager or tax adviser are deductible from the tax base. It is also worth pointing out the fact that the trips to the property should be reasonable and require additional justification. As a rule, expenses are written-off once a year.
Taxes for legal entities:
● Corporate Tax (Köperschaftssteuer): 15% (+ 5.5% for the "solidarity tax") = 15.5%;
● Fishing tax (Gewerbesteuer): 7 - 17%; the size of the interest rate depends on the region in which the legal entity is registered, and it is calculated using the formula: base rate of 3.5% × municipal factor (200 - 490%);
● Value Added Tax (Mehrwertsteuer): 19% for goods and services, and 7% for food, printed publications, etc.; expenses for the payment of VAT are included in the price of the final product or service; income from the rental of residential premises and land plots are not subject to VAT.
● Sales tax, inheritance tax and donation
Tax for capital gains on the sale of real estate is not levied if the property was used as a place of his permanent residence for the last 2 years or the person own the property more than 2 years. In other cases, the tax on income from resale is subject to mandatory payment. Its size is determined by the same rules as the amount of income tax.
The income received in the results of inheritance or donation is also a subject to taxation. It is usually about 7% - 50% and depends on the degree of kinship between the heir and the testator.
Costs for utilities and other costs
Real estate insurance is optional but highly suggested. Insurance premiums depend on the type of insurance chosen. Most of the property have fire and flood coverage. The amount of insurance payments is approximately €100 - €500 per year.
The amount of compulsory expenses for the maintenance of real estate in Germany depends on the category of housing. If the owner lives in his own apartment, he pays an average of €20-€40 a month for utilities such as cleaning the surrounding area and the entrance, lighting and garbage disposal). In addition, utility payments include costs for electricity, hot and cold water supply, central or gas heating.
Payment for utilities is charged only if the property is in operation. If the it is is leased, utilities are paid by the tenant. The owner bears expenses for the services of the house management that monitors the property (approximately €30- €50 a month).
If the building requires capital repairs and the budget is insufficient to carry out such repairs, the owned is obliged to recover the missing funds. Therefore, before acquiring the facility, you should carefully read the documents containing information about repairs or upgrades carried out earlier in the building.
Approximate maintenance expenses of residential real estate:
- The amount of insurance payments: €100 - €500 per year
- Expenses for cleaning the entrance and adjacent territory, gardener's services and garbage disposal: €20 - €40 a month
- House management services: €30 - €50 a month
- Contributions to the accumulation fund: an average of €2.70 / m² a month
- Power supply: €0,13 - €0,25 / kW * h + monthly fee from €4 per month (from €35 a month)
- Water supply: €1,9 - €2,7/ m³ (from 40 € a month)
- Gas supply: €0,5 - €0,8 / m³ (from 50 € a month)
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