Property-Related Taxes in Germany

Germany taxes non-resident individuals on certain categories of German-source income, including income derived from real estate located in Germany. Rental income from German property is therefore generally subject to German income tax even when the owner resides abroad.

Income Tax (Einkommenssteuer)

Income earned by nonresident foreigners is taxed at progressive rates.

Income Tax Rates (2026):

*The €12,348 basic personal allowance (Grundfreibetrag) forms part of the general German income tax schedule. However, an individual subject only to limited German tax liability as a non-resident generally does not receive the benefit of this allowance. For calculating the tax of a limited taxpayer, the basic allowance is generally added back to taxable income. Exceptions may apply where a non-resident qualifies to be treated similarly to an unlimited taxpayer, including under certain EU/EEA and income-based provisions.

Solidarity Surcharge (Solidaritätszuschlag)

A solidarity surcharge may be imposed in addition to German income tax. The standard surcharge is 5.5% of the assessed income tax, rather than 5.5% of taxable income.

For 2026, the surcharge is generally not imposed until the relevant income-tax assessment base exceeds €20,350 for individual assessment or €40,700 in cases where the joint/splitting tariff applies. A transitional zone applies above these thresholds before the full 5.5% surcharge is reached.

The applicability of these thresholds and relief provisions should be considered separately for non-residents according to their German tax status.

Rental Income Tax

Rental income from German real estate owned by a non-resident is generally taxable in Germany. The taxable amount is determined by deducting allowable expenses associated with the German property from gross rental receipts.

Deductible expenses can generally include qualifying financing costs, property management expenses, repairs, maintenance, insurance and other costs incurred in connection with generating rental income. Depreciation (Absetzung für Abnutzung or AfA) on the building may also be deducted. Land itself is not depreciable.

For comparison purposes on our 3-level income tax rate seen above, the calculations assume that 30% of gross rental income is deductible, representing expenses such as depreciation, maintenance, property management, insurance and qualifying financing costs. This leaves 70% of gross rental income as taxable net rental income. The example tax rates also include the Solidarity Surcharge.

Capital Gains Tax

Germany does not generally impose a separate capital gains tax rate on the disposal of privately held real estate. Instead, a taxable gain from the sale of German property within the applicable private-sale period is included in taxable income and taxed at the individual's applicable progressive income tax rate.

For privately held real estate, the relevant holding period is generally ten years. A gain from a sale occurring more than ten years after acquisition is therefore generally exempt from German income tax.

Where a property is disposed of within ten years, the taxable gain is broadly determined by reference to the difference between the sale proceeds and the property's tax basis, taking account of acquisition costs, qualifying capital expenditures and depreciation previously claimed. Specific exemptions can apply, particularly to properties used by the owner as a private residence.

Any applicable solidarity surcharge may be imposed in addition to the resulting income tax.

Real Estate Transfer Tax (Grunderwerbsteuer)

The acquisition of German real estate is generally subject to real estate transfer tax. In 2026, rates vary by federal state from 3.5% to 6.5% of the relevant consideration.

The applicable rates range from 3.5% in Bavaria to 6.5% in Brandenburg, North Rhine-Westphalia, Saarland and Schleswig-Holstein, with the remaining federal states applying rates between these levels.

In addition to transfer tax, purchasers generally incur land-registry, notarial and potentially legal or brokerage expenses. These costs vary according to the transaction and location, so total acquisition and disposal costs should not be represented as a single statutory percentage.

Corporate Taxation

German corporations are generally subject to corporate income tax at a rate of 15%. A solidarity surcharge of 5.5% is imposed on the corporate income tax liability, resulting in an effective combined rate of approximately 15.83%.

This rate does not include municipal trade tax (Gewerbesteuer), which is levied separately and varies depending on the municipality in which the company operates.

Property Buying and Selling Costs in Germany

Property Tax (Grundsteuer)

Owners of German real estate are subject to an annual municipal property tax known as Grundsteuer. Following Germany's property tax reform, the revised system has applied since 1 January 2025.

The amount payable depends on the property's assessed value or other applicable valuation basis, the relevant tax measurement rules and the multiplier established by the municipality. Some federal states apply their own property-tax models, meaning that the effective burden varies according to both the property's location and characteristics.

In practical terms, the range in Germany is between 0.1-0.2% of the value of the property per year.