Are you considering investing in a holiday home in Germany? Many Dutch people see Germany as an ideal destination for a second home, both as an investment and for personal use. But what about taxes and regulations? On this page you can read how to invest in German real estate in a well-prepared and fiscally sensible way.
Germany is popular among Dutch investors. In addition to the short travel distance and stable real estate market, Germany offers interesting tax advantages compared to the Netherlands. For example, the transfer tax is generally lower and there are attractive possibilities for tax-free sale after ten years of private ownership. By investing in German real estate, you therefore benefit twice: from rental income and value increase, combined with favorable tax conditions.
However, there is a lot involved in purchasing German real estate. From transfer tax to property tax, and from VAT obligation to inheritance tax: the German rules differ from the rules in the Netherlands. Especially if you own multiple homes or rent out both privately and commercially, expert tax guidance is essential to prevent unexpected costs. In the rest of this page you can read how these taxes work and what you need to take into account.
This tax varies per state and is between 3.5% and 6.5% of the purchase price. The percentage depends on the location of the property. The transfer tax applies to the land, the building and the outdoor facilities, but not to the inventory. The tax is part of the additional purchase costs and must be paid in full before the property is officially registered in your name. You do not have to file a tax return for this yourself; the notary reports the purchase to the tax office, which then sends you an assessment.
How you want to use your holiday home in Germany (private, rental, business) determines which VAT rules apply. It is therefore essential that the notarial purchase contract is formulated correctly. Certain fiscal choices – such as the VAT treatment – can only be recorded there and cannot be changed afterwards. Get advice about this in advance – this can prevent many problems later.
When purchasing a holiday home including inventory and a current rental contract, there is often a 'joint sale'. No VAT is charged, and you take over the existing VAT arrangement of the seller. This must be explicitly stated in the notarial deed of sale.
Is there no joint sale? Then the delivery is usually exempt from VAT. The seller can choose to charge VAT, but that is only allowed if you use the property for VAT-taxed rental. This choice must also be recorded in the purchase agreement.
You pay the property tax (land tax) annually on the value of the home. The surface area of the plot, the type of property, the age of the home and its location are taken into account. Each municipality determines the levy factor itself, with which the final tax amount is determined. You can pass this tax on to tenants as additional rental costs.
If you buy a holiday home in Germany and want to rent it out, you must choose how you allocate the property for tax purposes. Your choice will affect the tax you pay, the method of depreciation and the tax treatment upon sale. If you are a natural person, your home will usually be subject to income tax. If you buy through a legal entity, such as a GmbH or a BV, you will pay corporate tax. As a private individual, you can also decide to have the home treated as a business property. This will affect matters such as depreciation, tax upon sale and any business tax.
If you are a natural person and you assign the home to your private assets, you will pay income tax on the rental income. Under certain conditions, you can benefit from a tax-free amount of up to €9,744 per year. Your tax rate is progressive and is between 20% and 45%, depending on your total income. For high incomes, a small solidarity contribution or church tax may also apply. If you assign the home privately, you may depreciate 2% of the purchase value per year. After ten years, you can sell the home tax-free, if you do not sell multiple homes within a short period of time.
If you buy the property through a legal entity such as a GmbH or a BV, you will pay corporate tax. This amounts to 15%, plus a solidarity contribution of 5.5%. If the profit is more than €24,000 per year, business tax may also be due. If you allocate the property for business purposes, you may depreciate 3% per year on the purchase value. In the event of a sale, tax is levied on the difference between the sales price and the book value.
The rental of holiday homes becomes commercial if you, as a natural person, offer hotel-like services, such as providing breakfast or daily cleaning. If you buy and sell three or more homes within five years, this is also considered trade. In that case, you pay business tax on your profit. Legal entities, such as a GmbH or BV, are always liable for business tax.
For natural persons, there is an exemption of up to €24,500 per year. If you stay below that, you do not pay any business tax.
In Germany, the rental of real estate is considered a business activity. As a rule, 7% VAT is due on the rental income. In some cases, however, a VAT rate of 19% applies, or the rental is completely exempt from VAT. Each situation must therefore be assessed individually. To this end, you must submit a VAT return every month, in which you state the rent received and costs incurred. In this way, you meet the obligations and can reclaim the VAT paid.
Please note: If your annual rental turnover remains below €22,000 and you do not expect to exceed €50,000 in the following year, you can apply for an exemption as a small business owner. You will then no longer have to pay VAT, but you will also no longer be able to reclaim VAT on costs incurred.
Anyone selling a holiday home in Germany must take into account the so-called speculation period. According to § 23 of the German Einkommensteuergesetz (EStG), the profit from the sale of a home is taxable in Germany if the period between purchase and sale is less than ten years.
This also applies to Dutch owners – the location of the property determines the German tax liability, regardless of your place of residence.
If the sale takes place after the ten-year period, the profit is usually exempt from tax – an important point when planning your investment.
Our tip: consult a tax advisor in good time if you are considering a sale. With a well-considered approach, tax disadvantages can often be avoided.
Holiday homes in Germany are subject to German inheritance and gift tax. There is no treaty between Germany and the Netherlands to prevent double taxation. There is a possibility to offset the tax paid in Germany in the Netherlands. Get advice about this early to prevent double taxation as much as possible.
In addition to the German tax rules, there may also be consequences for your Dutch tax return. We recommend that you also seek tax advice in the Netherlands about this.
According to the double taxation treaty, Germany has the right to tax income from the German holiday home in most cases
Are you considering buying a holiday home in Germany? Heisterborg International combines in-depth knowledge of German tax law with a practical approach. We advise you in German, Dutch and English, which makes communication clear. In addition, we work completely digitally, so that we can always switch easily, wherever you are.
You will not receive standard advice, but guidance that is fully in line with your situation and goals. We will take care of all fiscal obligations concerning your holiday home. This way you can be sure that everything is correct, from purchase to sale, and you will get the most out of your investment in German real estate.
Contact Us"We notice that Dutch investors are often shocked by the German tax rules. That's why it's nice that we can explain everything in Dutch and tell them exactly what they need to pay attention to."
Specialised in international tax law
Heisterborg International works almost exclusively for Dutch clients, including many private and business investors with real estate in Germany.
We are part of the Heisterborg Group , a consultancy firm specialising in tax, legal and business economics advice. You can find us in Emsbüren, just across the border.
Read more about usRequest free and non-binding tax advice using the form below or call us on: +49 (0) 5903 / 968900.
