Last Updated on September 26, 2025
This guide will share everything you need to know about tax if you are a non-resident who is considering investing in German real estate.
Germany’s stable economy and resilient real estate market make it an attractive investment destination for international buyers.
However, navigating the German tax system can be daunting, especially for non-residents unfamiliar with local regulations or the language.
This guide provides non-resident investors with a comprehensive overview of German property taxation, helping you maximize returns, remain compliant, and avoid costly mistakes. Disclaimer: This guide is for informational purposes only. Always consult a qualified tax advisor before making decisions.
Key Tax Considerations for Non-Resident Property Owners in Germany
- Income from rental property is taxable in Germany.
- Property transfer and ownership taxes apply regardless of residency status.
- Capital gains rules differ based on ownership duration and use.
- Double Taxation Agreements (DTAs) may reduce or eliminate double taxation.
1. Don’t Do Your German Taxes Alone
Navigating the complexities of German tax law, especially as a foreign investor, can be daunting. While various tax reliefs exist for real estate investors, maximizing them requires a deep understanding of the system. Instead of struggling through unfamiliar regulations, let an experienced German property tax advisor guide you. A local tax advisor can:
- Identify all applicable tax reliefs: Discover the full range of deductions and exemptions you qualify for, potentially saving you significant sums.
- Ensure compliance: Avoid the risk of errors and penalties by having a property tax professional navigate the intricacies of German tax law.
- Minimize paperwork and stress: Focus on your investment strategy while your tax advisor handles the complex tax filings.
2. Know What Income You Must Declare
Non-residents must declare:
- Rental income (primary source).
- Other taxable income linked to the property (e.g., insurance payouts).
Proper reporting is crucial to remain compliant with German tax authorities. 
3. Claim All Allowable Expenses and Deductions
Property investors are eligible for a variety of tax breaks, and knowing about them ahead of time might save you a lot of money. You can take advantage of several attractive tax perks if you opt to rent your property in Germany. Deductible expenses may include:
- Mortgage interest mortgage interest
- Repairs and maintenance
- Management fees
- Insurance
- Advertising for tenants
- Council rates and local taxes
- Travel related to property inspections
Not deductible: tenant-covered costs or personal-use expenses. These deductions are available through your annual income tax return. If you are a non-resident property owner in Germany, our tax experts can take care of your annual tax filing requirement and claim all allowable expenses.
4. Understand Capital Gains Tax in Germany
If you sell your real estate at a higher price than it was bought for, the profit is known as Capital Gains and is considered taxable income in Germany.
- Capital gains tax applies if property is sold within 10 years of purchase.
- Exemptions:
- Owner-occupied for at least 2 years.
- Ownership > 10 years.
- Capital gains are taxed at progressive income tax rates plus solidarity surcharge.
Non-resident foreigners are only taxed on income earned in Germany. 2024 Income Tax Rates for Residents:
| Income | Tax Rate |
|---|---|
| Less than €11,604 | 0% |
| €11,604 – €66,760 | 14% to 42% |
| €66,760 – €277,825 | 42% |
| More than €277,826+ | 45% |
5. German Property Taxes You Need to Know
Property Transfer Tax (Grunderwerbsteuer)
- Paid on purchase of property.
- Rate varies by state: 3.5% – 6.5%.
- Example: Berlin = 6%.
You must pay a property transfer tax, known in German as Grunderwerbsteuer, when you buy real estate in Germany.
The real estate transfer tax is a one-time, legal transaction tax that is levied when you purchase property or land.
Transfer Tax Rates by State (2025)
| Income | Tax Rate |
|---|---|
| Bavaria | 3.5% |
| Baden-Württemberg, Bremen, Lower Saxony, Rhineland-Palatinate, and Saxony-Anhalt | 5% |
| Hamburg and Saxony | 5.5% |
| Berlin, Hesse, and Mecklenburg-Vorpommern | 6% |
| Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein, and Thuringia | 6.5% |
Annual Property Tax (Grundsteuer)
- Levied by municipalities.
- Paid quarterly.
- Calculation depends on assessed value and local multipliers.
Rental Income Tax
- Rental income taxed at progressive rates.
- Expenses deductible (mortgage interest, repairs, etc.).
- Depreciation: 2% for existing homes, 3% for new builds (first 8 years).
- Double Taxation Agreements (DTAs) usually give Germany taxing rights on rental income.
Landlords’ rental income is taxed in Germany in the same way as regular income, with progressive rates. Any rental properties in Germany will be subject to income tax and will need to be declared every year with a fiscal report (known as a Steuererklärung für beschränkt Steuerpflichtige).
Applicable double taxation agreements (DTAs), which apply taxation rights between the investor’s country of residence and the country in which the income is generated (“source country,” in this case: Germany), frequently assign the right to tax income from immovable property to the source country.
Foreign investors’ tax liabilities include income from rental and leasing, which is taxed at their individual personal income tax rate.
Inheritance and Gift Tax
- Applies to real estate in Germany, even if heirs live abroad.
- Rates range 7% – 50%, depending on relationship and property value.
- Exemptions available but must be applied correctly.
Non-German residents are generally subject to both inheritance and donation taxes on real estate located in Germany that is passed down through the family or given to a third party.
6. Keep Accurate Records
German tax office requires property investors to keep records such as:
- Purchase contracts
- Bank records
- Improvement invoices
- Tax filings
- Capital gains documentation
Records form the basis for deductions and audits.
7. Don’t Miss German Property Tax Deadlines
- 2024 return: July 31, 2025 (no advisor) / Apr 30, 2026 (with advisor).
- General rule: With tax advisor, deadline extends to end of February of the second following year.
8. Practical Tips & Professional Support
- Work with a German tax advisor to avoid penalties.
- Use online filing services like PTI Returns for non-resident tax compliance.
- Benefits: expert support, reduced stress, maximized deductions.
Germany offers attractive real estate opportunities, but tax compliance is crucial for maximizing returns.
Non-resident investors face unique challenges in navigating German property tax law, and professional guidance is highly recommended.
Glossary of Key German Tax Terms
- Grunderwerbsteuer (GrESt): Real estate transfer tax
- Grundsteuer (GrSt): Annual property/land tax
- Steuererklärung für beschränkt Steuerpflichtige: Non-resident tax return
- Gewerbesteuer (GewSt): Trade tax
- SchenkSt: Gift tax
- ErbSt: Inheritance tax