Tax on property income in Germany

Nonresident foreigners are taxed only on their German-sourced income. Married couples are assessed and taxed separately.

INCOME TAX (Einkommenssteuer)

Income earned by nonresident foreigners is taxed at progressive rates.

Up to €10,908 0% Up to €21,816 0%
€10,909 – €62,809 14% - 42% €21,816 – €125,619 14% - 42%
€62,810– €277,825 42% €125,620– €555,650 42%
Over €277,826 45% Over €555,650 45%
Source: Global Property Guide

In addition, if an individual is a registered church member, they might be charged an additional 8% to 9% on top of their income tax liability.

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%).

At the beginning of 2021, the German government decided to lift the solidarity surcharge from low to medium-wage earners. The income threshold rose from 972 EUR to 16,956 EUR for singles and from 1,944 EUR to 33,912 EUR for married couples.

Tax-free thresholds for the solidarity surcharge
Tax class Until 31/12/2020 From 1/1/2021
Single (Tax class I, II, IV, V, VI) 972 Eur 16,956 Eur (taxable income of about 65,500 EUR)
Married (Tax class III) 1,944 Eur 33,912 Eur (taxable income of about131,000 EUR)

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, and 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 the 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 Taxes (Grundsteuer)

The local property tax is levied on real estate in Germany. The tax base is the assessed value of the property. The basic tax rate is 0.35%, multiplied by a municipal factor. The effective tax rate usually falls between 0.26% and 1%.

The resulting base amount is further multiplied by municipal coefficients to calculate the final tax due, which ranges from 280% to 810%. The multiplier is 460% for Frankfurt and 175% for agriculture and forestry.

The real estate tax is deductible for income tax purposes if the property is used in a trade or business.

Property transfer tax

After acquiring a property you´re going to receive a bill from one of Germany´s federal states. The tax rate varies based on which state the property is located in.

Property transfer tax
Federal State Property Transfer Tax Rate
Bavaria 3.5%
Baden-Württemberg, Bremen, Lower Saxony, Rhineland-Palatinate, Saxony Anhalt 5%
Hamburg, Saxony 5.5%
Berlin, Hesse, and Mecklenburg-Vorpommern 6%
Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein, Thuringia 6.5%
Source: Global Property Guide


INCOME TAX (Einkommenssteuer)

Corporate tax is levied at 15%. In addition, a solidarity surcharge is levied at the rate of 5.5% of the corporation tax. The resulting combined rate is 15.825%.