Property tax: definition & explanation

The property tax is not to be confused with the land transfer tax. While the real estate transfer tax is only due once when a property or land is purchased, the property tax is levied four times a year. There is a distinction between property tax “A” and property tax “B”. While property tax “A” is levied on real estate and land for agricultural and forestry use, property tax “B” applies to other developed land and buildings. Thus, yield real estate and investment real estate fall into group “B”.

• Land tax “A” for land for agricultural and forestry use
• Real estate tax “B” for other developed and developable land plots

Calculation of property tax: important factors

There are several factors that influence the amount of property tax. These include the assessed value of the property, the individual levy rate, the state, as well as the type of property.

Here at a glance:

• Collection according to real estate value (assessed value), taxed property
• Municipality (individual assessment rate)
• State (old or new states)
• Type of real estate (house, duplex, apartment, other)

Let’s now take a closer look at this.

Unit value: value of the real estate

The standard value is the value of the real estate or the value of the property. Here is a short example calculation:

• Determined unit value: 100,000
• X Property tax rate: 0.35%
• X Municipal assessment rate (B): 470%.
• = Real estate tax rate

So, you need to know 1) the value of your property (assessed value), 2) the property tax rate for your property type, and 3) the municipal assessment rate (B).

Levy rate & property tax code: location and property type

The levy rate is an individually determined figure set by the city or municipality. It is multiplied by the assessed value of your property. The same applies to the property tax code. This depends on the federal state and the type of property.

You can find the exact property tax figures by state here: Property tax for real estate

For example, the property tax figure in Hamburg differs from the property tax figure in Berlin.

Example: Apartment for 100,000 euros

Let’s look at a quick example to finish:

• Determined unit value: 100,000
• Property tax rate: 0,35% = 350 Euro
• Municipal assessment rate (B): 470% = 1,645 euros
• = 1,645 Euro or in the quarter 411.25 Euro (basic tax rate)

Would you like to know more about buying an apartment or house? Then you will learn everything from A-Z here: owner-occupancy or renting, financing a condominium, apartment search, real estate portals, real estate agents, valuation, purchase prices, negotiations and taxes. Knowledge and experience from experts, in one guide.

✓ A guidebook
✓ All facts
✓ Insider tips
✓ Purchase checklists

Learn step-by-step the home buying process and lots of insider tips!

• Buy apartment

Brokerage commission: costs and breakdown

If a real estate agent is involved in your real estate purchase, costs will be incurred. These are called broker’s commission. The amount of the commission depends on the amount of the purchase price as well as on the federal state. For private purchases, the broker’s commission is split 50/50 between the buyer and seller. For commercial purchases, this division is individually negotiable.

• Private purchase: 50/50 between buyer and seller
• Commercial purchase: Freely negotiable

Fees by state: Table

Depending on the state in which the property is located, different fees are due. In principle, you can expect a brokerage commission between 3.57% and 7.14%.

Brokerage commission: 3,57% – 7,14%

So for private purchases, these values apply:

Buying real estate: Learning from A-Z

Here you will find everything you need to know for your real estate purchase from A-Z: owner-occupancy or rental, financing a condominium, apartment search, real estate portals, brokers, valuation, purchase prices, negotiations and taxes. Knowledge and experience from experts, in one guide.

✓ A guidebook
✓ All facts
✓ Insider tips
✓ Purchase checklists

Learn step-by-step the home buying process and lots of insider tips!

• Buy apartment

Metropolises in Germany: Rating

Tip: Here you can also find large cities and towns. Click here to go back to the overview: Real Estate Lage | Lukinski Rating.

List: Attractiveness of location / metropolises

List of all 17 metropolitan areas (over 500,000 inhabitants), sorted alphabetically. You can take the exact rating to compare the column “Value”. The general rating can be found under “Grade”. “Short term” refers to the trend of the last 10 years, long term considers the last 30 years.

Germany Rating: Capital Investment Location Comparison

Current Lukinski Ratings:

Large cities (67) up to 500,000 inhabitants

Often more interesting than the metropolises, the numerous big cities in Germany. From east (Leipzig) to west (Bonn), north (Rostock) and south (Nuremberg). Here you will find good yield properties with A and B ratings.

• Rating: Large cities up to 500,000 inhabitants

Cities up to 100,000 inhabitants

Your advantage in cities between 40,000 to 100,000 inhabitants? You have less national and international competition. Especially if you live locally, a good strategic advantage, even for real estate newcomers. What’s your city’s rating? Find out here:

• Rating: Cities up to 100,000 inhabitants

A / A+ Ratings: Hidden Champions

A / A+ ratings means fairly secure performance. Perfect for investment properties with low yield but high, later resale value. At the same time a strong inflation protection. However, in metropolises like Munich, nothing for real estate beginners without sufficient equity.

• A / A+ ratings in Germany

B- / B / B+ Ratings

All B ratings show cities with solid development. Here you can also find yield properties that immediately provide income that covers your monthly burdens around repayment, interest and maintenance. Ideally with additional extra, for active asset accumulation.

• B- / B / B+ ratings in Germany

C- / C / C+ Ratings

All C ratings show cities with lower growth rates. Here, real estate as an investment should be treated with caution, because the vacancy risk is greater. This means that you pay more for every month in which your property is not rented out. In addition, the increase in value of the property is very low, to hardly available.

• C- / C / C+ ratings in Germany

D- / D Ratings: Risk Champions

D-rated cities have high risk, because their entire structure is extremely stagnant or even reduced. Economy, inhabitants, infrastructure, these are all indicators. D-Ratings are definitely not for beginners. Here you need not only experience, but also very good local knowledge to find the few, profitable properties. However, you will hardly ever experience an increase in value here.

• D- / D Ratings in Germany

Additionally, in the following there may be slight grammatical errors, as this article was written by a German tax expert. This does not detract from the quality of information.

Grundwerbsteuer Explained: Purchase of Land or Property

As described in the introduction: Whenever a property or part of a property is purchased, land transfer tax is incurred in Germany. The tax is levied on the basis of the Land Transfer Tax Act (GrEStG). The amount of the real estate transfer tax is determined by the federal states. It is therefore a state tax. The respective federal state can therefore decide for itself whether it passes on the tax levied to its local authorities. But first we look at what a Grunderwerbsteuer really even is.

Are you looking at investing in German real estate? Don’t miss our article

• How to Save on Real Estate Taxes in Germany

Grunderwerbsteuer Meaning

Grunderwerbsteuer is a tax on the purchase of real estate. The translation of Grunderwerbsteuer is real estate transfer tax or land transfer tax. Note, in the USA, this concept has different meanings depending on the state (more on that in our article on Real Estate Transfer Tax in the US). How the Grunderwerbsteuer works is explained further below.

Who pays the Real Estate Transfer Tax?

After you have bought your property, the purchase must still be notarized. The purchase contract states who has to pay the land transfer tax: buyer or seller. Without this additional agreement, the law (§13 No. 2 GrEStG) states that first of all the previous owner and the purchaser are tax debtors, i.e. both together, buyer and seller.

After notarization, the notary sends the signed purchase contract to the responsible tax office, which then writes to the party to be charged with the real estate transfer tax assessment. The tax is due one month after notification of the tax assessment. However, the tax office may set a longer payment deadline if necessary (see Grunderwerbsteuergesetz (GrEStG) §15 Due date of the tax).

Grundwerbsteuergesetz (GrEStG): § 13 Tax debtor

Here is a short look at the legal text on real esate purchases according to §13 No. 2 GrEStG. This is our best attempt at a translation, these terms are as similar as possible to the original meaning.

Tax debtors are:

• By Default: the persons involved in a purchase transaction as contractual parties;
• In case of acquisition by operation of law: the previous owner and the acquirer;
• In the case of acquisition in expropriation proceedings: the acquirer;
• In the case of the highest bid in compulsory auction proceedings: the highest bidder;
• In the case of the merger of at least 95 per cent of the shares in a company in the hands of the acquirer: the acquirer;
• In case of acquisition by several companies or persons: these parties;
• In the event of a change in the membership of a partnership: the partnership;
• In the case of an economic interest of at least 95 per cent in a company: the legal entity which holds the economic interest.

Source: Federal Ministry of Justice (as of 09/2020).

Cost table: Tax According to Purchase Price

Status: 09/2020

Tax Rate by State: Amount

• Bavaria – 3,50%
• Berlin – 6,0%
• Bremen – 5.0%
• Hessen – 6.0%
• Lower Saxony – 5.0%
• Rhineland-Palatinate – 5.0%
• Saarland – 6.50% li>
• Saxony – 3,50%
• Saxony-Anhalt – 5.0%

Property Tax Compared to Trade Tax, Income Tax and Sales Tax

Real estate tax is levied on land, but also on hereditary building rights to land, the so-called substance tax. The assessment basis for the land tax is usually the value of the land plot. The tax rate is usually set at the municipal level.

This infographic below shows the tax revenue of German municipalities according to tax types (in billions of Euros). Please note that an English translation was not available. Blue denotes income tax, green is trade tax, purple is property tax, and orange is goods-and-services tax.

Purchase Price – 1.000.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 1 million Euro.

Purchase Price – 1.200.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 1.2 million euros.

Purchase Price – 1.500.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 1.5 million euros.

Purchase Price – 2.000.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 2 million euros.

Purchase Price – 2.500.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 2.5 million euros.

Purchase Price – 5.000.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 5 million euros.

Plots, apartments & house in Germany. Classical or exotic: Which property is suitable as an investment? The interview: Real estate as a capital investment. In our city analysis you will find clues as well (see below).

Tip from the real estate agent: You want a purchase price for comparison? Before you evaluate your real estate , use apps from real estate portals. Here you can simply track your location with GPS and the app will show you purchase prices and comparison offers in your area. The fast way to a first, rough evaluation of your property.

Price: Rent, buy, living

Renting, buying, living. Here you will find more information about the population, rental prices and purchase prices in the individual cities:

• Buy and rent: Berlin
• Buy and rent: Düsseldorf
• Buy and rent: Frankfurt
• Buy and rent: Cologne
• Buy and rent: Hamburg
• Buy and rent: Hanover
• Buy and rent: Munich
• Buy and rent: Stuttgart

Tax optimization: Procedure and Knowledge Build-Up

Topic Taxes. This brings us directly to the topic of optimizing taxes. Knowledge about finances and taxes is absolutely essential when buying your first property. Understanding taxes is important, because this is how you can convert taxes into private assets.

How does it Work? An Example for Real Estate Investors

In the case of real estate, for example, this involves lifting platforms for duplex parking spaces. So lifting platforms, where you get e.g. two cars on one parking space. They have a shorter depreciation period. Here, depreciation for wear and tear applies, distributed over the actual useful life, deductible according to the official lists of the Ministry of Finance. Exception expenses up to 800 Euro – without VAT – can be deducted immediately in the year of purchase.

You will of course no longer get such knowledge from your tax consultant. Why should he or she, if he or she knew about it, your tax advisor* would be a millionaire* himself.

Details

More details on optimizing your tax sheet for your real estate can be found in our article on the matter

• German Real Estate Taxes – Saving on your Property Investment

Overview of statics

• Mechanical department
• Architect or structural engineer calculates statics
• Statics is the load-bearing capacity of the building
• Build it yourself – learn statics from the example of a carport
• If not observed high health risk & no insurance cover
• Statics in English – “statics”

If you want to learn more about statics, we have selected an instructive and profound explanation for you here

Back to the wiki: Real Estate