Germany: Taxes and Costs
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Rental income tax is high in Germany
Effective Tax Rate on Rental Income |
|||
| Monthly Income | 1,500 | 6,000 | 12,000 |
| Tax Rate | 15.8% | 17.1% | 17.6% |
| Click here to see a worked example | |||
Source: |
Disclaimer | ||
INDIVIDUAL TAXATION
Non-resident foreigners are taxed only on their German-sourced income.
INCOME TAX
Income earned by non-resident foreigners is taxed at progressive rates, with the minimum tax rate at 25%.
INCOME TAX |
|
| TAXABLE INCOME, () | MARGINAL TAX RATE |
| Up to 7,664 | 25% |
| 7,665 - 52,152 | 25% on band over 7,664 |
| 52,153 - 250,000 | 42% on band over 52,152 |
| Over 250,000 | 45% on all income over 250,000 |
| Source: Global Property Guide | |
Solidarity Surcharge
In addition to the income tax itself, a solidarity charge of 5.5% is also imposed on the levied income tax (i.e., not the taxable income), i.e. where the income tax rate is 25% the effective solidarity surcharge rate is 5.5% x 25% = 1.375% and the effective income tax rate amounts to 25% + 1.375% = 26.375% (not 25% + 5.5%).
RENTAL INCOME
Rental income is taxed at progressive rates. Owners can deduct any expenses from the gross receipts, which were incurred to produce, maintain and safeguard that income. Depreciation is generally set at 2% for existing houses, for newly built houses at 3% for the first eight years. (In the past some depreciation rates were higher).
Investments done for maintenance of the property cannot be deducted in the year when they were done if they exceed 15% of the purchase price. They have to be added to the depreciable value of the property instead.
CAPITAL GAINS
If the property was held for more than ten years, gains incurred from the sales of property do not attract capital gains tax.
Otherwise, capital gains realized by an individual from the sale of property within ten years after acquisition are taxed at the standard progressive income tax rates plus solidarity surcharges. Acquisition costs and improvement costs are deductible from the selling price when computing taxable capital gains.
PROPERTY TAX
Property Taxes (Grundsteuer)
Municipalities impose an annual tax on land/ property. The tax is levied on the assessed value of the property using the basic federal rate of 0.35%. The amount of which is further multiplied by multipliers to calculate for the final tax due. This multiplier varies by municipality but the average multiplier for residential properties is 1.5%.
Germany - more data and information
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