What are the tax implications for a foreign resident purchasing and/ or selling property in your jurisdiction?

In Germany we must consider real estate transfer tax on one hand and income tax on the other. It’s all about tax structuring via an efficient legal structure and we mostly assist international investors to consider real estate transfer tax issues on a case-by-case basis to determine the best ownership structure.

Germany has a speculation tax that requires a buyer to keep a property for more than 10 years before they can sell it tax free, no matter how big a profit they make. Transfer tax also plays a major role, as public bodies try to achieve more and more income. Several states in Germany charge a real estate transfer tax of up to 6.5 per cent per deal.

The bigger the deal, the more tax is due, and thus investors have more incentive in avoiding it. This is sometimes possible through a share-deal, depending on the legal form, which needs to be checked quite attentively. This involves a structure with two buyers, which takes advantage of the rule that states if one party is not acquiring more than 94 per cent of the company then there is no real estate transfer tax to be paid. The model brings a second buyer into the property deal with a 6 per cent stake.

Read the full Virtual Round Table Series from the IR Real Estate Working Group here.