German Property Transaction Tax
Buying property in Germany triggers specific tax obligations that every investor should understand. One of the most important is the real estate transfer tax, known as Grunderwerbsteuer. This guide explains the rates, who pays, deadlines, exemptions, and key points for U.S. and international buyers.
German Property Transaction Tax (Grunderwerbsteuer)
The German Property Transaction Tax (Grunderwerbsteuer) is a real estate transfer tax applied whenever property ownership changes hands in Germany. It is a one-time tax due after purchasing real estate—residential, commercial, or land.
How Much Is the Grunderwerbsteuer?
The rate is set by each federal state (Bundesland) and commonly ranges between 3.5% and 6.5% of the purchase price. The property’s location is therefore a key driver of your total acquisition costs.
Indicative rates by state (examples)
- Bavaria (Bayern): 3.5%
- Saxony (Sachsen): 3.5%
- Hamburg: 5.5%
- Berlin: 6.5%
- Brandenburg: 6.5%
- Thuringia (Thüringen): 6.5%
Who Pays the Tax?
In practice, the buyer is responsible for paying the Grunderwerbsteuer. The notary handling the purchase agreement informs the tax office, which then issues an assessment. Payment is required before you can be registered as the legal owner in the land registry.
When Is the Tax Due?
Shortly after the contract is notarized, the tax authority (Finanzamt) sends the assessment. The deadline is typically around four weeks from the assessment date. Without timely payment, registration in the land register will be blocked.
Are There Exemptions?
Standard property purchases usually trigger the tax. However, exemptions may apply, including:
- Transfers between close relatives (e.g., parents ↔ children)
- Qualifying corporate restructurings
- Transfers via inheritance or gift (subject to other tax rules)
Key Takeaways
- One-time real estate transfer tax in Germany
- Rates vary by state (~3.5%–6.5%)
- Buyer pays; notary notifies the tax office
- Pay before land registry entry can proceed
- Limited exemptions (relatives, restructurings, inheritance/gifts)
Frequently asked Questions about German Property Transaction Tax:
ℹ️ Click a question to reveal the answer:
What is German real estate transfer tax (Grunderwerbsteuer)?
German real estate transfer tax (Grunderwerbsteuer) applies when property ownership in Germany changes hands. The tax is triggered not only by a direct purchase, but also by certain share deals involving companies that own German real estate.
What are the current German real estate transfer tax rates?
The tax rate varies by federal state in Germany, ranging from 3.5% to 6.5% of the purchase price (or the assessed property value if higher). For example, Bavaria applies 3.5%, while Berlin and most other states apply 6.0–6.5%.
Who is liable to pay real estate transfer tax in Germany?
Typically, both the buyer and seller are jointly liable under German law. In practice, however, the purchase contract usually assigns payment responsibility to the buyer.
Are there exemptions from German real estate transfer tax?
Yes. Transfers between spouses, close family members, or due to inheritance and gifts are generally exempt. Additionally, intra-group restructurings may qualify for relief if strict conditions are met.
How are share deals involving German real estate taxed?
Share deals can trigger real estate transfer tax if 90% or more of a company’s shares change ownership within 10 years. This rule applies to corporations and partnerships holding German real estate.
How is the taxable base determined for property transfer tax?
The tax base is usually the purchase price stated in the contract. If no price is paid (e.g., transfers without consideration), the tax office uses the fair market value of the property.
When must German real estate transfer tax be paid?
Payment is due after the tax office issues the tax assessment notice. Without proof of payment (tax clearance certificate), the transfer of ownership cannot be registered in the land register.
How do U.S. investors buying German property deal with transfer tax?
U.S. investors must factor in German transfer tax as an acquisition cost. Proper structuring is essential to avoid unexpected liabilities, especially for share deals. Professional advice is strongly recommended — contact our team for tailored support.
How does German real estate transfer tax interact with VAT?
Real estate transfers are usually exempt from VAT. If VAT is applied (opt-in cases), the transfer may be exempt from real estate transfer tax. Correct structuring is crucial to avoid double taxation.
What strategies exist to reduce or avoid German transfer tax?
Strategies include careful structuring of shareholdings, use of family transfers, or group reorganizations that qualify for exemptions. However, German tax authorities scrutinize avoidance structures closely. Speak with an expert before structuring a deal — book a consultation.
Which authority handles real estate transfer tax in Germany?
The local tax office (Finanzamt) responsible for the property’s location handles the tax assessment. They issue the assessment notice and confirm payment to enable land register entry.