Real estate is considered one of the most important values in Germany. But anyone who gives away or inherits a house or apartment can quickly find themselves in conflict with the tax authorities.
Where there is often a problem
The transfer of a property initially sounds like a formality at the notary. In fact, it’s about a dense network of tax regulations. Unexpected burdens arise again and again because the speculation period is overlooked, because allowances have been exceeded or because the tax office considers a payment as consideration. If you know the typical pitfalls, you can make targeted use of design options.
Speculation tax
One of the most common traps concerns the speculation tax. If a property is transferred within ten years of acquisition, the tax office can assume a taxable sale transaction. It becomes particularly tricky when the new owner takes over outstanding loans or when siblings receive a severance payment as part of an inheritance dispute. In such cases, it is quickly referred to as a “paid transaction” and the tax claim is there. According to the German Press Agency, these constellations in particular are a frequent stumbling block.
Gift and inheritance tax
The importance of the allowances is even greater. According to Section 16 Paragraph 1 No. 1 ErbStG, spouses may transfer up to 500,000 euros tax-free, children up to 400,000 euros, and grandchildren up to 200,000 euros. For children-in-law, however, it remains only 20,000 euros. How high the tax burden is in the end depends on the tax class. The allowances can be fully utilized again every ten years. According to kanzleimauss.de, this makes it possible to make the donation in installments or, for example, to distribute the donations proportionately to the children.
Real estate transfer tax
It is often assumed that gifts and inheritances are completely exempt from property transfer tax. In the event of inheritance, according to Section 3 No. 2 GrEStG, there is generally no real estate transfer tax. The transfer by inheritance is tax-free, regardless of the family relationship, but there are restrictions. Gifts to siblings, nephews, nieces or friends are subject to real estate transfer tax. If a property is transferred under the condition that usufruct or a right of residence is retained (i.e. a partial value remains with the donor as consideration), real estate transfer tax may also be due on the value of this consideration, according to gevestor.de.
International aspects and double taxation
Things become even more complex if one of the people involved lives abroad or a property abroad is affected. Germany levies gift and inheritance tax even if only a domestic object is transferred. german-probate-lawyer.com points out that a tax liability remains even if the purchase is made abroad. Double taxation agreements exist to prevent double taxation. The agreement with the USA is particularly relevant. For this purpose, professional advice is useful in order to apply the regulations correctly.
Editorial team finanzen.net
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