You want to sell your apartment building, what will you have to pay? When selling residential or residential and commercial properties, first-time sellers ask themselves one question in particular: How much tax do I have to pay on the sale? Here is a quick insight into the typical taxation of real estate sales. Want to learn more? My tip: the right experts and real estate tax coaching (not from a tax advisor, but from real-life investors). I will be happy to put you in touch with my experts, just write to me: Contact.
The difference: In an asset deal in the real estate context, specific assets such as land and buildings are sold individually, whereas in a share deal the shares in the company that owns the real estate are transferred.
A share deal means that the buyer does not acquire the property itself, but the – in this case – Immobilien GmbH. Here is a short infographic. Then back to the direct sale of the apartment building, after which I will explain more about holding companies and taxes on the sale.
Typically, as a private individual, you usually sell the apartment building directly. These are relevant for you:
Speculation tax
Three-object rule
Taxes on sale
A very quick look at taxes when selling an apartment building in Berlin:
Speculation tax: sell tax-free
3 objects rule in Berlin
Asset & share deals: only 1.54% tax
Speculation tax: sell tax-free
The speculation period explained more quickly:
Owner-occupied = 3 years
Rented = 10 years
If you sell within the speculation period, you must – simply put – pay tax on the profits as normal, just like income from work, regardless of whether you are employed or self-employed. After the period has expired, the sale is tax-free. If you want to do a quick calculation, use my free speculation period calculator.
Tax calculation: Example
If you sell within the speculation period, you must – simply put – pay tax on the profits as normal, just like income from work, regardless of whether you are employed or self-employed. As a single person, this would typically mean a top tax rate of 42%.
Sale within the speculation period (< 10 years) as a private individual:
Purchase 2024 = 2,100,000 euros
Sale in 2033 = 4,100,000 euros
Taxable profit = 2,000,000 euros
At 42% (single person) = 840,000 euros
Sale within the speculation period (< 10 years) as a company:
But you can’t buy 10 properties now, wait 3 years and take the profits from property appreciation, because:
3 objects rule in Berlin
There is also the 3-property rule. If you sell more than 3 properties in 5 years, it is commercial real estate trading.
When selling real estate, the “3-object rule” refers to the fact that private individuals in Germany can sell up to three properties within a five-year period tax-free. If a person sells more than three properties within this period, this is considered commercial real estate trading and is subject to income tax – even if they are not rented out but are owner-occupied.
After 10 years of holding, however, the sale is always tax-free.
Why does this rule exist?
Just like the speculation tax, the rule is intended to curb speculation on the real estate market and encourage the sale of real estate for residential purposes.
So how do the “big players” save on taxes?
Share deals: selling a company “instead of” real estate
One option for a tax-optimized sale is the share deal. In this case, however, the property must already have been purchased by a company (such as Immobilien GmbH) (not as an individual).
Only 1.54% tax on sale
A share deal is possible if you have the company in a holding structure. This means you only pay 1.54% tax due to the intercompany privilege(Section 8b KStG).
Asset deal = property is sold
Share deal = company is sold (with real estate ownership)
Let us now calculate our example again, starting with the direct sale of a property:
Sale of a real estate GmbH as a company (share deal):
Purchase 2024 = 2,100,000 euros
Sale in 2028 = 3,100,000 euros
Taxable profit = 1,000,000 euros
For GmbH 1.54 % = 1,540 euros
You can see how huge the difference is.
No real estate transfer tax on purchase
Let’s delve a little deeper into the subject of real estate and tax optimization!
Again, simply put:
Sale of Immobilien GmbH below 89% = no real estate transfer tax
Why is this the case? In Germany, the sale of shares in a GmbH that owns real estate is not normally subject to real estate transfer tax as long as the shares are below a certain percentage(§ 5 GrEStG).
What are the advantages? Real estate as a capital investment must bring a profit, usually calculated by the rental yield. The land transfer tax increases the purchase price by up to 6.5%, depending on the federal state. For 1 million euros, this is a cost of 65,000 euros. This directly increases the yield by a few percent.
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