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Q: property tax in Germany ( Answered,   1 Comment )
Subject: property tax in Germany
Category: Business and Money > Accounting
Asked by: gangleman-ga
List Price: $15.00
Posted: 25 Oct 2006 07:20 PDT
Expires: 24 Nov 2006 06:20 PST
Question ID: 776730
would a british company pay tax in germany on rental income from a
residential appartment in Berlin and would it have to pay capital
gains tax on a profit from a  sale of a residental appartment in
Berlin ?
Subject: Re: property tax in Germany
Answered By: keystroke-ga on 25 Oct 2006 11:33 PDT
Hello gangleman,

Thank you for your question.  The answer to both questions is yes, the
company would be liable.

Rental Income taxability--

Since the corporation owns the flat and probably intends to make a
profit, the income will be taxed in Germany.

Expatica -- "Ask our accountant: Double trouble"

"In this case, a fundamental German tax rule needs to be considered in
advance: Income is only taxable if the taxpayer has the intention to
receive a profit on a long term basis."

Mayer Brown Rowe-- Taxation of Investments Into German Real Estate

"The rental income resulting from German real estate is sub-
ject to German corporate tax at the rate of 25 percent plus
solidarity surcharge in the amount of 5.5 percent levied on
the corporate income tax assessed. The overall tax rate
amounts therefore to 26.4 percent. The tax for rental income
is calculated on basis of rental income received in excess of
expenses and costs attributable to that income (including
interest payments). The income is calculated on an actual
basis (?Zuflu▀-/Abflu▀prinzip?) and the Corporate Investor is
obliged to file a tax return in Germany."

Industrial Investment Council-- Germany

"Corporate entities
which are not German residents are subject to German income tax on their German
source income (limited taxation). Since 2001 the corporate income tax is 25% for
both resident and non-resident corporate entities. The effective tax
rate varies from
9% - 19% depending on the municipality."


Capital Gains Tax--

Worldwide Tax-- Germany  Income Taxes and Tax Laws

"# Capital Gains (A Company) The standard rate of tax for a company is 25%.
# A capital gain from the sale of real estate that is invested within
4 years in the purchase of alternative real estate is tax exempt
subject, to certain conditions."

Search terms:
germany taxes income earned
rental income taxable germany

I hope this fully answers your questions. If you need any additional
clarification, let me know and I'll be glad to assist you.

Subject: Re: property tax in Germany
From: myoarin-ga on 25 Oct 2006 12:18 PDT
Keystroke's answer looks good, speaking as a US expat living in
Germany for many years.
The Mayer Brown and Worldwide Tax sites seem especially good and need
to be read and fully understood.  The later makes the point the tax on
income related to real estate is not available for offset under the
treaty to avoid double taxation.

Here is the text of that.  See Articles VIII and XII.

There is also a minor tax on real estate, the "Grundsteuer", but this
can be included as an expense with the maintenance costs for the flat,
which are deductable from the rental income.

Incidentally, from my experience here, foreign companies usually avoid
this whole subject by not buying residential real estate.

If employees in Germany are employees of the UK company  (not a German
subsidiary), the Worldwide Tax site has a pertinent statement:
"A foreign resident who is employed in Germany pays tax only on income
earned in Germany."

In the past, this has meant that income for the days spent working
outside Germany were not subject to German personal income tax, but
then subject to tax in the other country, which could be negligeable,
however, due to the low annual income represented.  In the past, this
also applied to German employees who were on the payroll of the
foreign company, but this may have changed.

This all just points out the complications and indicates that
"informed professional advice" is needed.  As the disclaimer below
mentions, anything here is no substitute for that.

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