Do you ever think about buying a vacation home in Germany ? Yes? Then read this article to be well informed about all the tax issues. This is because buying a house in Germany involves transfer tax (Grunderwerbsteuer). You pay this tax on the actual purchase price.

Good to know: the rate of this tax can vary between 3.5 to 5%, depending on the province in which the property is located. Are you planning to rent out the second home? Then opt for the German VAT regime and pay 19% VAT.

When you own the property

Another thing to consider when you own property in Germany is that you have to pay the local property tax (Grundsteuer). You pay this tax quarterly to the municipality.

Please note that its amount is calculated annually using a complex system. There are (increasingly) German municipalities that also tax second homes with a tourist tax, known as Zweitwohnungsteuer. The rate of this tax varies from municipality to municipality. The average rate is about 10%.

Renting out your vacation home

If you decide to rent out your vacation home, know that you must pay German income tax (Einkommensteuer) on the rental income. This is calculated per calendar year by deducting the acquisition costs from the rental income earned.

Do you rent out the property? Then you become a turnover tax liable entrepreneur in Germany.

Selling your vacation home

If you decide to put the vacation homes up for sale, keep in mind that you have to pay tax on capital gains. Two conditions must be met: the sale takes place within ten years of the purchase and the capital gains exceed €600.

Donating or inheriting a property in Germany

If you decide to bequeath the property to your heirs, they will have to deal with German inheritance tax (Erbschaftssteuer) because the bequeathed vacation home is located in Germany. The amount of the inheritance tax depends on the relationship of the heir to the person from whom you inherit the property. In addition, the size of the estate plays a role.

If you decide to gift the German home, you will have to deal with German gift tax (Schenkungssteuer). The same rules apply here as for inheritance tax.

What about Dutch tax?

Because you live in the Netherlands, the Netherlands will levy income tax on the German vacation home. Not only the Netherlands, even Germany will include the vacation home in the German taxation because the home is located there.

Don’t panic, under the tax treaty between the Netherlands and Germany, the Netherlands will grant a relief to avoid double taxation. As for donating or bequeathing the home, double taxation will occur. Moreover, the Netherlands will levy gift and inheritance tax because you, the donor or testator, are a resident of the Netherlands. Not nice news, but thanks to the Dutch Double Tax Avoidance Decree, you can expect a reduction.

All in all, it is advisable to inform yourself well if you are planning to buy a vacation home in Germany. In this process, it is not only useful but also fun to visit the Second Home fair in the Netherlands or the Second Home Expo in Belgium. On the exhibitor list of each edition you will find the participating parties of the respective edition. Good luck and have fun buying a home in Germany!