Taxes are an important part of the economic system of any state. The German tax system is relatively well-established and transparent, and the authorities are closely monitoring the fulfillment of tax obligations.
There are five main types of tax associated with real estate in Germany, and they apply to citizens of other countries.
What are these taxes?
1. Property transfer tax (Grunderwerbsteuer)
After purchasing the property, the buyer pays a share of the value of the object at a time. This share varies from 3.5% to 6.5% depending on the federal state. How exactly - you can look at the map.
2. Property Tax (Grundsteuer)
As an owner, you regularly pay an amount that depends on the location, size and type of property. For apartments it is on average not such a large amount - from 100 to 400 euros per year.
3. Income tax (Einkommensteuer / Körperschaftssteuer)
If you rent out the property, the income earned is also taxable. Its size depends on your total income and on whether an individual or legal entity rents the object. In Germany, a progressive income tax scale is established - the more you earn, the more you pay: from 14.7% to 47.4%.
Moreover, taxpayers are charged a “premium in support of solidarity”, the money from which is sent by the state to support the economies of the former lands of the GDR.
4. Capital Gains Tax (Kapitalertragsteuer)
When selling a property, you get a certain amount of money, which is considered income. Moreover, you deduct from the amount received by you what you spent on the purchase of this object + depreciation costs. The greater the difference between the spending on the purchase and the profit from the sale - the higher the tax will be. Of course, your annual income is also taken into account (remember the progressive scale). If you have owned a property for more than 10 years (at least 10 years and 1 day!) Or have lived in an apartment or house for the last 3 years, you do not have to pay tax.
5. Donation and transfer by inheritance (Erbschaftsteuer and Schenkungsteuer)
Receiving property by inheritance or as a gift, you must pay the appropriate tax. It is calculated on the basis of the value of the object, the degree of kinship with the former owner and your tax class.
So, what is next?
Every year, tax residents fill out a declaration. This can be done in paper form or in the Elster electronic system. You can fill in the declaration yourself with sufficient knowledge of the language and with patience, or by seeking the help of lawyers or tax advisors. In an electronic system, it is easier to fill in yourself, since it “prompts” what to enter in these or other fields.
Where to pay?
The main method of paying taxes is bank transfer or online payment. Bank details are sent by financial management.
When to pay?
German tax residents are required to file a declaration every year. Residents of other countries who receive income from Germany are also required to file income tax returns.
The declaration must be filed no later than July 31 of the following year. That is, the declaration for 2019 will need to be filed until July 31, 2020.
But! If the declaration is filed by your tax adviser or lawyer, the deadline is increased until December 31 of the following year.
In addition, you can extend the deadline for a written application to the local finance department (Finanzamt) with a good reason. If you file an electronic declaration, in some federal states you can also expect to extend the term.