Germany: Taxes and Costs
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Rental income tax is high in Germany
Rental income is taxed as ordinary income. Applicable rates for fiscal year 2007 are as follows:
INCOME TAX |
|
| TAXABLE INCOME () | MARGINAL TAX RATE |
| Up to 7,664 | nil |
| 7,665 - 12,739 | 15% - 23.97% on band over 7,665 |
| 12,740 - 52,151 | 23.97% - 42% on band over 12,740 |
| 52,152 - 250,000 | 42% on band over 52,151 |
| Over 250,000 | 45% on all income over 250,000 |
| Source: Global Property Guide | |
The same holds true for the tax rates for nonresidents, except that the minimum tax rate is 25% and marital benefits are generally not available. 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%).
Effective Tax Rate on Rental Income |
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| 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
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For resident individuals belonging to the Roman Catholic Church, German Protestant-Lutheran Church, Reformed Church or Jewish parishes, a Church Tax of 8-9% is also imposed.
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.
Property Taxes
Municipalities impose an annual tax on land/ property Grundsteuer. 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%.
Capital Gains Tax
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 taxes from the sale of property are fully taxable if realized by an individual within ten years after acquisition (unless the property is occupied by the owner himself).
Germany - more data and information
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