Back to EU Member states Germany Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs.

Slides:



Advertisements
Similar presentations
Introduction Leasing and hire purchase are financial facilities which allow a business to use an asset over a fixed period, in return for regular payments.
Advertisements

©The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin Chapter 7 Capital Gains and Other Sales of Property “If a client asks in any but an extreme case.
Value Added Tax/ Umsatzsteuer (UStG)
TAXATION TAXATION OF INDIVIDUALS IN THE CZECH REPUBLIC.
1 SIICs and OPCIs Listed and unlisted real estate investment schemes in France Marc Cretté FIDAL.
CHAPTER 15 International taxation. Contents  Introduction – Main types of taxation  Corporate income tax and dividends  Deferred taxation  International.
Real Estate Investment Chapter 8 Single-Family Dwellings and Condominiums © 2011 Cengage Learning.
Real Estate Investments in Italy made by foreign investors: FOREIGN COUNTRY  Direct investment Investment through Italian Real Estate Investment Fund.
Procopio International Tax Institute “Overview of Mexican Tax Considerations of Real Estate for US Investors” -ABC’S of SRL’S, SA etc February 2006.
Chapter Objectives Be able to: n Explain sources of Canadian tax law. n Identify the two primary entities that are subject to tax. n Explain how residency.
Chapter 16 Federal Taxation and Real Estate Finance © OnCourse Learning.
Chapter Objectives Be able to: n Explain the nature of the different types of property income. n Differentiate between the different methods of computing.
Maximising tax efficiency 22 November 2006 Eleanor Watts.
© OnCourse Learning. All Rights Reserved. Federal Taxation of Home Ownership Learning Objectives  Define and list examples of income tax deduction benefits.
American Citizens Abroad Town Hall Seminar Daniel Hyde 23 September 2013.
8-1 ©2008 Prentice Hall, Inc ©2008 Prentice Hall, Inc. CONSOLIDATIONS (1 of 3)  Source of consolidated tax return rules  Affiliated groups  Advantages.
Structures for Investors Presented by: Kerrie-Anne Bailey KAS Tax & Business Solutions Phone: (07) April.
Chapter Objectives Be able to: n Explain the difference between capital income and business income. n Apply the general rules in determining capital gains.
Chapter 10 Fundamental Income Tax Issues. Tax Basis: Its Nature and Significance  Newly acquired property’s initial tax basis is starting point in determining.
TAX Taxation of property transactions in Slovakia Mark Gibbins, Partner 10 November 2005.
Johan Boersma TAXATION OF COMPANIES IN THE CZECH REPUBLIC.
1 © #1 F LOTT & C O. PC - A TTORNEYS DOING BUSINESS IN THE US – TAX CONSIDERATIONS Doing Business in the U.S. Tax Considerations American-Hellenic.
Transfer Pricing & Expatriate They Could Cross! August 20, 2015 UTA Mary K. Thomas Weaver, LLP Slide 1.
Real Estate (REITS)
FINANCIAL SERVICES… Presented by: Ruchika Sharma.
AIM Why should we invest in real estate? DO NOW What are the advantages of investing in real estate? REAL ESTATE.
Income Tax concepts: General Concepts Ability to pay concept
Johan Boersma TAXATION OF INDIVIDUALS IN THE CZECH REPUBLIC.
1 Belgium-China income tax treaty Marc De Mil Fiscal Department for Foreign Investments Federal Public Service Finance.
MEXICO´s INCENTIVES FOR REAL ESTATE INVESTMENT October 20, 2007 Course Number MUNOZ MANZO y BELAUNZARAN, S. C. SPEAKER ALEJO MUNOZ.
TAXATION TAXATION OF INDIVIDUALS IN THE CZECH REPUBLIC.
Taxation for Real Estate Investors Course Speaker Allan Madan, CA Tel:
1 Taxation of Inbound Transactions Recall definition of an inbound transaction Two taxing regimes: Passive investment income 30% tax on gross income (many.
Closed-end Funds About 700 funds Fixed number of shares Shares sell like stock Generally hold less liquid assets A lot are country funds or bond funds.
Chapter 24 Chapter 24: The Role of Real Estate Investment Trusts (REITs) Andrew Davidson Anthony B. Sanders Lan-Ling Wolff Anne Ching.
Chapter 16 Federal Taxation and Real Estate Finance.
Back to EU Member states Netherlands Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs.
Back to EU Member states NEXIA Property and Taxation.
Taxation. Taxation In Australia Australia is a Federation of States Pre WW1 income tax was levied by the individual states During WW1 the federal government.
Back to EU Member states Malta Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on.
Back to EU Member states Ukraine Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs.
1 1. Describe the nature of the corporate form of organization. 2. Describe the two main sources of stockholders’ equity. 3. Describe and illustrate the.
CORPORATE FORM OF ORGANIZATION A corporation is a legal entity created by law that is separate and distinct from its owners.
Back to EU Member states Russia Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs.
Back to EU Member states Sweden Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs.
Chapter 6 Income from Property 1. Inclusions Sec. 12 Interest income from savings, deposits, loans, bonds, and debentures; Dividends from shares; and.
CORPORATIONS: ORGANIZATION AND SHARE CAPITAL TRANSACTIONS CHAPTER 14.
Back to EU Member states Spain Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on.
Click to edit Master title style Corporations: Organization, Stock Transactions, and Dividends 13.
Real Estate Principles and Practices Chapter 16 Investment and Tax Aspects of Ownership © 2014 OnCourse Learning.
The Fundamentals of Investing
Horlings is a world-wide network of independent accountants and consultants firms 6 February 2009 The Dutch co-operative Nexia European Tax Group Meeting.
Capital Gains and Losses Cassie Warren. Does capital gain count as income for that year on your taxes If your capital losses exceed your capital gains,
Real Estate and High-Risk Investments Chapter 16.
Profit tax Emil Garayev 2 April I. General aspects  Tax payers and taxable base:  Tax rate and the reporting period  Major exemptions: - income.
©2011 Cengage Learning. Chapter 17 ©2011 Cengage Learning INCOME TAX ASPECTS OF INVESTMENT REAL ESTATE.
FISCAL REGIME FOR MINERAL OPERATIONS By RICHMOND OSEI-HWERE FACULTY OF LAW, KNUST.
Real Estate Principles and Practices Chapter 16 Investment and Tax Aspects of Ownership © 2010 by South-Western, Cengage Learning.
Chapter – 3 setoff and carry forward of losses
Real Estate Finance Residential decision making: Buy or lease?
Pitfalls and Opportunities in dealing with foreign buyers and sellers of real estate.
Association Of Residential Letting Agents (ARLA) – Cornwall Stephen Maggs & Alex Reed Robinson Reed Layton Property Tax Overview and Update.
INCOME FROM HOUSE PROPERTY. INTRODUCTION This lesson deals with income, which falls under the head ‘Income from house property’. The scope of income charged.
SMALL BUSINESS TAX TIPS BY ALLAN MADAN. By Allan Madan SMALL BUSINESS TAX TIPS.
 Tax Tips for Real Estate Investors With Allan Madan.
CISI – Financial Products, Markets & Services
ACC402 - Foundation Accounting Topic 2 - INCOME TAX FOR SALARY AND WAGE EARNERS Week 4 lecture 1.
Simon Thang, Thorsteinssons LLP
Corporations: Organization, Stock Transactions, and Dividends
© OnCourse Learning.
Presentation transcript:

Back to EU Member states Germany Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on property acquisitions 5.Issues during Ownership 6.Disposal of property 7.Non resident owners of property 8.Sundry issues

Back to EU Member states 1. Introduction - Germany There are several reasons as to why a person would buy or build property in Germany. Amongst them are the following: Investment: Real estate is an important and necessary asset in any diversified portfolio. This applies to private persons as well as to institutional investors. Furthermore as of January 2008 special tax rules now apply for real estate investment trusts. Owner occupation: There are two main aspects to buying property in Germany; first to use as a holiday home and second to reside permanently in Germany. Business use: If a foreign company intends to set up a subsidiary or a permanent establishment in Germany, it could be advantageous to buy or build their business premises instead of leasing them.

Back to EU Member states 2. Contact Details Mr Carsten Franke Ebner Stolz Moenning Bachem Tel.: – Mr Sten Guensel Ebner Stolz Moenning Bachem Tel.:

Back to EU Member states 3. Form of property ownership The main forms of property ownership in regards to both private persons and companies are: Freehold Leasehold Rental Statutory heritable building right (“Erbbaurecht”)

Back to EU Member states 4. Taxes and other costs on property acquisition There are four important matters of expenses which must first be considered by the purchaser of German property. Real property transfer tax (“Grunderwerbsteuer”) In general, subject to the real property transfer tax is the transfer of ownership with some exceptions. In January 2006 the federal states were being granted authority to autonomously determine the real property transfer tax rate. Nevertheless in practice the real property transfer tax rate amounts to 3.5 % of the assessable property value. Exceptions can be seen for example in Berlin and Hamburg where the tax rate has been increased to 4.5 %. Notwithstanding any agreements to other effect the real property transfer tax must be paid in half by the buyer and in half by the seller. However in practice, it is normally agreed, that the purchaser pays the entire real property transfer tax.

Back to EU Member states 4. Taxes and other costs on property acquisition (cont’d…) VAT (“Umsatzsteuer”) Usually, the acquisition of property is exempt from VAT. However, if the seller and the buyer are both entrepreneurs, the option of VAT can be utilised, so that the sale is subject to 19% VAT. The exercise of this option may be advantageous for the seller to avoid input VAT repayments in some cases; the buyer is likely to agree on this if he is able to claim the VAT from the purchase as input VAT. If the buyer is a private person, the acquisition is always exempt from VAT. Cost for notary and entry in land register The cost for the notary and for the land register entry amounts to approximately % of the purchase price. The cost is dependant on several factors (for example entry of a mortgage) and must be paid usually by the buyer. Estate agent fees (Maklergebühr) Estate agent fees (also known as ‘courtage’) are often calculated at about 5 – 7 % of the purchase price. The fees are not regulated by law and as such are negotiable.

Back to EU Member states 5. Issues during ownership One must always distinguish the use of the property for private, business or rental purposes. Private residential use / rental use The German property could basically be used for two purposes. On the one hand it could be used for private residential purposes (for example as family home or as a holiday house). In this case German income tax would not apply. On the other hand the German property could be used by a private person for achieving rental income. The rental income is subject to income tax. The rental income will be assessed at revenues basically less cost for building depreciation (2% p.a.), operation, maintenance and interest. Business use / rental use within a business On the one hand the property can be used as business premises. In this case the business activities on the property usually create a permanent establishment in Germany. Furthermore the property can be used for rental purposes within a business. If the German property is used for rental purposes within a business the income is subject to income tax. The rental income is determined as the difference between the rental revenue and the deductible business expenses (for example interest cost within the interest deduction limitation, depreciation, operation, maintenance costs, etc.) on an accrual basis. The building may basically be depreciated over its expected life-span (usually 3 % p.a.).

Back to EU Member states 5. Issues during ownership (contd…) The German tax burden depends on the legal form of the investor. If the owner of the German property is a corporation the realised rental income is subject to corporate tax as well as, in most cases, trade income tax. The corporate tax rate amounts to 15 % plus 5.5 % solidarity surcharge thereon. The trade income tax depends on the municipal rate fixed by the municipality, the average trade income tax rate amounts to 14 %. Altogether, the average nominal tax rate of corporations would be approximately 30 %. If the activities of the Corporate Investor are limited to the management of property assets and if the Corporate Investor elects to do so, he may enter the so called “extended exemption regime“ (erweiterte Grundstückskürzung) and therefore avoid paying trade income tax. The exemption is only applicable if the investor would be considered as ‘not in the business of trading in real estate’. Real estate tax Property owners will be charged with real estate tax every calendar year. The tax amount is calculated as the sum of assessed value multiplied by the tax rate (2.6 ‰ ‰) and the municipal rate fixed by the municipality (usually between 350 % %). In the case of the use for business or rental purposes the real transfer tax is deductible for income tax matters. Net wealth tax („Vermögenssteuer“) Net wealth tax has not been levied since 1997.

Back to EU Member states 6. Disposal of property The capital gains from the disposal of property are usually subject to corporate or income tax. A capital gain is calculated as the difference between the property’s purchase price and its book value plus any disposal costs. In cases where the seller is a private person the tax liability of a capital gain from the disposal of German property is dependent on how the property has been used by the seller. If the property has been used by the owner for own residential purposes the capital gain is usually tax exempt. If this is not the case then the capital gain is subject to income tax plus solidarity surcharge thereon (maximum nominal tax rate would be 47 %) within 10 years after acquisition. If the seller is a corporate investor then the capital gain from the disposal of the property is subject to a corporate tax rate of % (including solidarity surcharge) as well as, in usual circumstances, trade income tax. As a result the capital gains are subject to an nominal tax rate of approximately 30 %. Under certain circumstances the trade income tax may be avoided there the seller successfully enters the “extended exemption regime” (see section 5.2). For the taxation of non resident corporate investor see section 7. Furthermore, provisions for roll-over relief exist in Germany for businesses so that the taxation of the capital the capital gain from the disposal of German property may be avoided for a period of time. However it must be recognized that the utilization of the German roll-over relief system is dependant on the fulfilment of strict conditions.

Back to EU Member states 7. Non resident owners of property The following description highlights the distinction between a direct investment in Germany by a private person and by a corporate investor. In both circumstances it is assumed that no German subsidiary has been or will be established in Germany due to the investment. Both the private investor and the corporate investor are subject to limited tax liability. In cases where the property has been rented out by a private person the revenues minus the tax deductible expenses (e.g. depreciation, operation, interest, maintenance) is subject to German income tax plus solidarity surcharge. The maximum tax rate for a single individual as of 2009 is about 47 %. The rental income is calculated on a cash basis and the foreign investor is obliged to file a tax return in Germany. Concerning the taxation of capital gains from the disposal of property, there are no differences to the taxation regulations attached to of a resident owner (therefore see section 6.)

Back to EU Member states 7. Non resident owners of property (contd…) The Corporate Investor is subject to limited tax liability with respect to all the rental income and capital gains resulting from the use and sale of the German property. Unless the Corporate Investor does not have a permanent establishment in Germany the realized rental income is only subject to corporate income tax and solidarity surcharge. Under German law, a permanent establishment of the corporate investor is established if it has a fixed place of business in Germany which serves its business activities. Usually, the Corporate Investor does not create a permanent establishment in Germany if it merely holds legal title to German property which is leased to third party. Taking effect from 1 January 2009 rental income of corporate investors will be calculated on an accrual basis. As mentioned above the Corporate Investor can deduct certain expenses as long as they have been incurred in relation to the rental income. In general, interest costs are deductible. However, as from January 2008 the interest deduction limitation also applies to non-resident corporate investors. Accordingly, the tax deducibility of interest costs may be limited to 30 % of the taxable EBITDA if the net interest costs are higher than EUR 1 million (minimum threshold) and the corporate investor is part of a companies group.

Back to EU Member states 8. Sundry issues Since the beginning of 2008 property investments in Germany can be conducted via German Real estate investment trusts (GREIT). The purpose of the introduction of the GREIT was to attract property investments to Germany by using the international accepted vehicle of a REIT. The GREIT should enable property fund raising on a broad basis. A GREIT is a stock corporation listed at the stock exchange. The GREIT can be tax favourable if certain conditions are met. The German double taxation treaties usually grant the right to tax to the state of source. Double taxation then will be eliminated for some countries by the credit method whilst for others by the exemption method.

Back to EU Member states