Germany: Property Taxes
Overview
Germany employs a progressive tax system that applies to both residents and non-residents earning income within the country. Taxes are levied at the federal, state, and municipal levels. The primary taxes affecting individuals and businesses include personal income tax, rental income tax, corporate tax, and capital gains tax. The tax year in Germany aligns with the calendar year, and filing is typically required by July 31st of the following year, although extensions may apply.
Rental Income Tax
Rental income in Germany is taxed as part of an individual's overall income and is subject to the progressive income tax rates. Tax-Free Allowance (Grundfreibetrag): For 2025, the first €12,096 of annual income is tax-free for individuals, and €24,192 for married couples filing jointly.
<table> <tbody> <tr> <td>Up to €12,096</td> <td>0%</td> </tr> <tr> <td>€12,097 to €17,443</td> <td>14% - 24%</td> </tr> <tr> <td>€17,444 to €68,480</td> <td>24% - 42%</td> </tr> <tr> <td>€68,481 to €277,825</td> <td>42%</td> </tr> <tr> <td>Over €277,826</td> <td>45%</td> </tr> </tbody> </table>Deductions: Maintenance costs, property management fees, and mortgage interest are deductible from rental income.
<table> <tbody> <tr class="blue-row" > <td colspan="3"><strong>Monthly income, €</strong></td> </tr> <tr> <td>1500</td> <td>6000</td> <td>1200</td> </tr> </tbody> <tbody> <tr class="blue-row" > <td colspan="3"><strong>Tax rate, %</strong></td> </tr> <tr> <td>9.92</td> <td>37.00</td> <td>41.00</td> </tr> </tbody> </table>Corporate Taxation
Corporations in Germany are subject to a combination of federal corporate tax, solidarity surcharge, and municipal trade tax. Federal Corporate Tax: 15% flat rate. Solidarity Surcharge: 5.5% of the corporate tax amount. Trade Tax (Gewerbesteuer): Varies between 7% and 17.5% depending on the municipality. Effective Corporate Tax Rate: The combined rate generally ranges from 30% to 33%, depending on the municipality. Special Considerations: Small businesses (Kleinunternehmer) may benefit from reduced tax obligations, while certain deductions apply for R&D activities and reinvested profits.
Capital Gains Tax
Capital gains tax applies under specific conditions, particularly related to the holding period and the use of the property. 10-Year Rule: If the property is held for more than 10 years, any capital gains from its sale are tax-exempt. This applies to both primary residences and investment properties. Taxation for Properties Sold Within 10 Years: If the property is sold within 10 years of purchase, the capital gains are taxed at the seller's progressive personal income tax rate. The taxable gain is calculated as the difference between the sale price and the original purchase price, minus allowable expenses (e.g., renovation costs, notary fees).