Why do I have to pay land transfer tax?

Everyone who buys a property has to pay the real estate transfer tax. The good thing about it – it only has to be paid once at the time of purchase, and not annually like property tax. Since the real estate transfer tax is more or less depending on the federal state, one should inform oneself about the percentages before blindly buying an apartment for emotional reasons, because the price always plays a role. Generally, the land transfer tax is set between 3.5% and 6.5%.

Calculation of the real estate transfer tax

The real estate transfer tax can be calculated quite simply:

Purchase price x tax rate by federal state = real estate transfer tax

Overview: Property tax rate of the federal states

Here is a brief overview with the 16 federal states and the individual real estate transfer tax rate:

The next step: brokerage costs in the search for housing

You want to buy your first property, such as a condominium, and want to hire a real estate agent? Good idea, but first you should know that a real estate agent costs quite a bit of money, whereby a distinction is made between private and commercial sales. How much that is, as a percentage of the purchase price, you can find out here.

Buying real estate: What costs will I incur?

When buying a property, you always have to reckon with compound costs. On the one hand there is the purchase price, or the price for which the property is advertised, and on the other hand there are the ancillary purchase costs.

Incidental purchase costs: What are they?

The ancillary purchase costs are not always the same, they differ depending on the federal state. Therefore, always inform yourself in advance about the land transfer tax and the brokerage costs of the federal state in which you want to buy. The notary costs and the land register entry, on the other hand, always remain the same in percentage terms.

Incidental purchase costs are derived from:

• Real estate transfer tax (3.5-6.5%); varies by state
• Notary fees (1.5%)
• Land register entry (0.5%)
• Broker commission (3.57-7.14%; 50:50 for private purchase); varies by state

How do I calculate the total cost of my dream property?

The calculation of the service charges and the subsequent total costs of a property is actually quite simple. So that you understand it directly, we have an example calculation for you here. Let’s assume you buy a condominium in North Rhine-Westphalia with a purchase price of 200,000 euros. The final price is made up of six steps.

The six steps to the final price:

1. Purchase price
2. Real estate transfer tax
3. Notary fees
4. Land register entry
5. Brokerage costs
6. Incidental purchase costs

Step 1: Purchase price of the property?

Let’s start with the purchase price. In this example, it is 200,000 euros for a condominium in NRW.

• Purchase price: 200.000 Euro

Step 2: Amount of real estate transfer tax?

In NRW, the land transfer tax for each property is 6.5%. For our apartment, this means a surcharge of 13,000 euros

• Real estate transfer tax: 13,000 euros

Step 3: Amount of notary fees?

The notary fees are the same in every federal state. They amount to 1.5% of the purchase price, which corresponds to 3,000 euros.

• Notary fees: 3,000 euros

Step 4: Costs of the land register entry?

The costs of the land register entry are also the same in every federal state, namely always 0.5%. So another 1,000 euros are added to the purchase price.

• Land register entry: 1.000 Euro

Step 5: Calculation of the brokerage costs?

When you hire a real estate agent, you always pay a certain fee in brokerage costs in addition. These costs vary depending on the federal state. In NRW these costs amount to 3.57%. The positive thing about it? The brokerage costs are divided equally between the buyer and seller, i.e. 50:50%.

• Brokerage commission: (3.57% [7,140 / 2]): 3,570 euros

Step 6: The result of the total cost

Once you have calculated the incidental costs in relation to the purchase price, you can determine what you will ultimately have to pay.

• Purchase price: 200.000 Euro
• Real estate transfer tax (6.5% in NRW: 13,000 euros
• Notary fees (1.5%): 3,000 euros
• Land register entry (0.5%): 1,000 euros
• Brokerage commission: (3.57% [7,140 / 2]): 3,570 euros

Total amount:

• Total incidental costs: 20,570 euros
• Total price at purchase: 220,570 euros

The next step: land transfer tax

You have found your dream apartment at a dream price? Good, but the purchase price is accompanied by ancillary costs, which include land transfer tax. But how high is the land transfer tax that I have to pay additionally, once when buying my first own apartment? Depending on the state in which you buy, the land transfer tax has a different percentage. How you can easily calculate this, you can find out here!

Determine maximum purchase price: Creditworthiness, equity & Co.

How much real estate can I afford at all? This question is asked at the beginning of the process of buying what may be your first home and depends on many factors. These include your creditworthiness and self-disclosure, in terms of assets, the monthly asset balance (repayment), the equity and the mortgage lending value of the property to be financed. Here you will learn everything you need to know to determine the maximum purchase price.

• Maximum purchase price

German taxes at a glance: Declaration and more

The German bureaucracy confronts many people with several questions, and the topic of taxes is no exception. We would like to bring you closer to the world of German taxes and introduce you to the common forms of taxation in Germany. Taxes are often an annoying matter, both as a private person and as a company, but if you can clear up and understand the confusion, you should no longer have a problem with taxes. But not for nothing there is the tax advisor in case of need, who can help, but may be very expensive. We owe our know-how to the experts at Lukinski, among others.

Source: Lukinski – Taxes in Germany

Income tax (ESt): tax for natural persons

Income tax – ESt for short – is usually levied on the income of natural persons, according to their ability to pay. The income is understood as the sum of all earned income within the meaning of the Income Tax Act (EStG) minus the sum of all deductions relevant under tax law (such as any allowances). Taxable individuals are divided into self-employed persons, who generally have to pay their income tax themselves, and employees, whose income tax is withheld by their employer in the form of wage tax and paid to the tax office on their behalf.

As a joint tax, this tax revenue is divided between the federal, state and local governments. The municipalities receive the rate applicable under federal law – currently 15 percent of wage tax and assessed income tax – while the remainder goes to the federal government and the states in equal shares. As a rule, all natural persons are liable to income tax and must pay tax on their income from self-employed and non-self-employed activities.

How much is the income tax?

Income tax cannot be calculated as a lump sum. Depending on how high the individual annual income is, a different percentage of income tax is due. From an annual income of approx. € 9,400, the initial tax rate is “only” 14%. The top tax rate is around 42% from an annual income of around €57,000 (as of 2020) – but only for single people.

For people who are married, however, the rules are different. For married people, for example, the initial tax rate is 14% with a taxable income of up to approx. 18,800€.

Between 14 and 42 %, depending on income level

Payroll Tax (LSt):

Since wage tax is not a separate type of tax, but only a special form of levying income tax (§ 38 EStG) on income from employment, the Income Tax Act (EStG) is the legal basis for wage tax.

The taxable income forms the assessment basis for income tax. The tax liability is determined by the income tax scale (§ 32a EStG). This tariff assigns a tax amount to each level of taxable income. Thus, the tax scale is the core of the Income Tax Act.

To facilitate the deduction of income tax, 6 income tax classes have been created in which the different rates are incorporated. Wage tax is paid by your employer and deducted from your wages every month.

Trade tax (GewSt): For commercial enterprises

As a rule, trade tax is levied on the income of every German commercial enterprise and is thus based on the objective earning power of the respective company. Since limited liability companies, stock corporations and the like are always regarded as commercial enterprises by virtue of their legal form, trade tax is mandatory for corporations – regardless of the composition of the founding team.

As an object or property tax, trade tax is by its nature one of the real taxes. Effectively, it belongs to the municipal taxes and contributes significantly to their financial system. The municipalities are entitled to levy the tax and determine the tax rate applicable for a given year by resolution.

How much is the trade tax? – Formula & Calculation

The individual trade tax for your company is determined with the help of the tax rate, which is currently 3.5 percent (as of 2020). This means that you have to pay 3.5 percent of your trade income to the tax office. The trade income is made up of your profit minus the legally given tax-free amount (currently €24,500). This trade income multiplied by the statutory measurement figure results in the sum that you have to pay to the tax office as trade tax.

Formula for calculating: Trade income (profit minus tax-free amount) x statutory measurement figure (currently 3.5%)

Important dates: Prepayment

Trade tax is payable quarterly on 15 February, 15 May, 15 August and 15 November in equal instalments as an advance payment. These taxes are no longer deductible as a business expense beginning with the 2008 tax period, but may be credited as a lump sum against income tax payable. Dates for advance payment of business tax:

• February 15
• May 15
• August 15
• November 15

Value added tax (VAT): Tax for delivery & service

Sales tax is usually levied on all sales that a company generates in the domestic market for sales tax purposes. This includes all supplies of goods and services, as well as occasional ancillary transactions, which the company provides for consideration as part of its business activities. VAT amounts that a company has paid for supplies and services it has received and that can be substantiated can be claimed as input tax deductions and thus reduce the company’s VAT burden.

Sales tax = value added tax

From an economic point of view, the own turnover tax thus represents a general consumption tax, but in Germany it ultimately functions as a transfer tax and is ultimately charged to the end consumer. Because it is passed on, sales tax is typically classified as an indirect tax. Currently, the standard German VAT rate is 19 percent – 7 percent on reduced goods – and is one of the main sources of revenue for financing the federal budget.

Important dates: Prepayment

• On the 10th of the following month (submission to the tax office)

How much is the sales tax?

The value added tax in Germany is a community tax. The standard tax rate in Germany is currently (as of 2021) 19 percent. For certain transactions, however, there is also a tax exemption or a reduced tax rate of currently 7 percent.

Value added tax Germany (normal tax rate): 19%.

Real estate transfer tax (GrESt): Purchase of property or land

Whenever a property or share of a property is purchased, land transfer tax is incurred in Germany. The tax is levied on the basis of the Land Transfer Tax Act (GrEStG). The amount of the land transfer tax is determined by the federal states. It is therefore a state tax. The respective federal state can therefore decide for itself whether to pass on the tax levied to its municipalities.

After you have bought your property, the purchase still has to be notarised. The purchase contract states who has to pay the real estate transfer tax: Buyer or Seller. Without this additional agreement, it is the case that according to the law (§13 No. 2 GrEStG), the previous owner and the purchaser are initially liable for the tax, i.e. both together, buyer and seller.

After notarisation, the notary sends the signed purchase contract to the responsible tax office, which then writes to the party to be charged with the real estate transfer tax notice. The tax is due one month after notification of the tax assessment. However, the tax office may set a longer payment deadline if necessary (see Real Estate Transfer Tax Act (GrEStG) §15 Due date of the tax).

How much is the land transfer tax?

The real estate transfer tax is determined by the individual states and is therefore not uniform. Currently (as of 09/2020), the real estate transfer tax is between 3.5 and 6.5 %. In Saxony, for example, the real estate transfer tax is 3.5%, whereas in North Rhine-Westphalia it is 6.5%.

Between 3.5 % and 6.5 %, depending on the federal state

Corporation tax (KSt): For legal entities

Corporate income tax is usually levied on the income or profit of legal entities domiciled in Germany and is thus complementary to income tax (ESt), which is usually levied on individuals. Taxable persons typically include corporations, associations, cooperatives and foundations. A limitation of corporate income tax comes into play, for example, if the management and headquarters of the legal entity are located abroad. Political entities, federal companies, state banks and social security funds, professional associations and some others are fully exempt from the obligation to pay corporate income tax.

As a corporate tax, corporate income tax counts as a community tax and is levied by both the federal government and the states. The amount of the levy is based on the taxable income, which is the result of the profit less special expenses and extraordinary burdens, and is currently 15 percent plus the solidarity surcharge (SolZ), resulting in an overall burden of 15.825 percent. Corporate income tax is payable quarterly on March 10, June 10, September 10 and December 10 in equal instalments as an advance payment and is offset against the actual tax liability at the end of each financial year.

Important dates: Prepayment

Dates for advance payment of corporate income tax:

• March 10
• June 10
• September 10
• December 10

How much is the corporate income tax?

Corporate income tax is a business tax for legal entities and is currently 15%, in some cases plus a solidarity surcharge, resulting in a total of 15.825%.

Corporate income tax: 15

Capital gains tax (KapESt): Tax on profit distribution

Tax law provides that (in addition to the income tax of any natural person with shareholder status) capital gains tax is levied on all natural persons resident in Germany who benefit from a distribution of profits. As a result, the recipient – but not the corporation – is burdened. The capital gains tax burdens both the profit income of shareholders of a GmbH and the distribution of dividends to shareholders of a stock corporation.

For the sake of simplicity, 25 percent of the dividend is withheld directly by the AG for share holders, similar to the way regular employers withhold wage tax (LSt) for their taxable employees. Capital gains tax – abbreviated to KESt, KapESt, KapErtSt or KapSt – is a special form of income tax levied here: Once the tax burden has been withheld, the income tax is deemed to have been paid and the income does not have to be declared in more detail – at least insofar as no other type of income applies or the special tax rate applies.

If, on the other hand, the registered office of a shareholder is abroad, the so-called withholding tax comes into effect and the provisions of the double taxation agreement (DTA) of the respective country must be taken into account. The final withholding tax is also levied on shares held as private assets within Germany.

How much is the capital gains tax?

The capital gains tax is also known as the final withholding tax and is levied on generated investment income. Since 2009, this has been levied at a uniform tax rate of 25%. If applicable, church tax is also levied.

Capital gains tax: 25

Source: Lukinski – Taxes in Germany

Guide: Taxes, Income & Co. – Everything explained!

Taxes are dry and annoying for most people. But those who deal intensively with the topic can also recognize its advantages. For example, if you know your way around, you may be able to save or avoid a lot of taxes with the right strategy. So it’s worth getting to know and understand taxes, because in the end you can always make a profit from them – and you don’t necessarily need an experienced tax advisor for that!

Taxes in Germany: Income tax, property tax & more explained

Whether income tax, wage tax, real estate transfer tax or trade tax: there are many taxes in Germany. So it’s understandable that many people find it difficult to keep track of them all. Here we present the German tax forms and summarize them roughly. Which tax has to be paid under which circumstances – whether for individuals or companies – and much more you can find out here in a summary. We would like to give you an overview of the common taxes in Germany in the following linked article.

• Taxes Germany

Taxes USA: Buying property and paying taxes in America

What taxes do you pay when you buy a house in the US? In this article you will find a list of all the types of taxes you have to pay, how much they are, what they are used for and where you can learn even more about the subject. Everything you need to know about taxes related to buying a property, be it a house or a vacation home. We answer your questions here like: What are “transfer taxes”? How much is the property tax when buying a property? You can find out all this and more in the article linked below.

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Inheritance tax on real estate: tax-free amount & market value

Anyone who inherits or wishes to inherit real estate should take a few things into account, as taxes are also levied on inheritances in Germany. The amount of the tax allowance depends on the degree of relationship to the testator. Relevant here is the tax class to which the heir belongs and the tax rate applicable to this tax class. Since 2009, it has been common practice for inherited real estate to have inheritance tax determined according to the market value.

• Inheritance tax real estate

Save taxes: Where do I start? – Examples

Classification, income, turnover, coaching: tax advantages and benefits as well as tips and tricks on the subject of “saving taxes” are essential for entrepreneurs, freelancers, pensioners & Co. in order not to lose track of the many laws and guidelines in tax law. Although everyone is familiar with the word “tax”, only a few people actually know what taxes are. What taxes are there? For what do we pay taxes and how much? To whom do we pay taxes? What tax tricks and tax saving tips are there? And very important: How does saving taxes work at all and which tax saving tools should I use? You can find out about this and much more below, quickly and easily.

• Tips & Tricks: Where do I start? Save taxes

Video Tips: Taxes explained by experts – tricks and more

Understanding taxes is not easy, especially with such a complicated tax system as in Germany. But once you have a grasp of it, you gain many advantages. We have compiled helpful expert videos for you, with which you can understand the world of taxes easier. Whether it’s tax returns, real estate taxes or basic tips and tricks: you’ll get help here, and in an understandable way!

Overview Tips & Tricks: Tax Videos

Tax basics: explanation, definition and settlements

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Tax return: how, when and where? – Deadlines and instructions

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Taxes real estate: basic knowledge and where you can save

Real estate is basically a big financial issue. Buying, selling, renting, investing, etc. But what about taxes when it comes to real estate? Through tips and tricks you can save a lot of taxes, you just have to know how. In our video list you will find many videos in which experts explain to you what really matters and which mistakes you should avoid at all costs. With this help, you will soon be able to fully understand the topic of real estate taxes and save money!

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Taxes & Capital Gains: Capital gains tax and more

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Tax tips & tricks: recommendations for families, employees & more

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Book Tips: Recommendations and tax optimization

Everyone knows them and virtually no one likes to deal with them: taxes. But taxes don’t always have to be something negative. With tips and tricks, everyone can save taxes, be it when buying or selling a home or the usual annual tax return on all kinds of topics. We’ve rounded up the most interesting and informative topics for you. With book recommendations we try to bring you closer to the world of taxes and show you how you can save as much money as possible with as little effort as possible. Find out more here!

Overview Tips & Tricks: Tax Books

Tax basics: tax lexicon, basic knowledge and more

Taxes. Everyone has to pay them, but very few people have a complete overview. Tax advisors, who are well versed in the subject matter, are often expensive and not an option for everyone. In this article, we have therefore compiled book recommendations for you, in which experts discuss the basics around the topic of taxes. Among them you will find, for example, a tax encyclopedia or the basics of the real estate industry in the area of taxes. Find helpful tips and tricks for all your questions here!

• Book Tips: Tax Basics

Tax return: where, when and how? Learn how to do it!

The tax return is an unpleasant task for many people every year. But the world of taxes is not that complicated and inscrutable, especially not the tax return. Who, when, what and above all how and with whom you have to file a tax return, these questions will be answered in the following recommended books. We have compiled the most successful books by experts and professionals on the subject of tax returns, so that with this knowledge you no longer have to worry about your tax return in the future!

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Taxes real estate: buy or sell your own home

Taxes in the field of real estate and home ownership: For beginners, the tax world is already quite confusing, but to combine the whole thing with the real estate world is a whole new world. We want to make this entry easier for you with the best recommendations and tips from the pros. Our book tips will guide you through the whole world of real estate and taxes and offer help for learning the basics, guides for private investors and savings tips.

• Book Tips: Taxes real estate

Taxes & capital gains: Flat rate withholding tax and more

If you are interested in the topic of taxes in connection with capital gains and would like to read an informative and helpful book, then you have come to the right place. The higher the tax burden, the more important the topic of avoiding taxes becomes for you. Especially if your profit is growing and growing. The more profit, the higher the taxes: a vicious circle. But of course, there are also many options that the state provides you with. What’s important for you: Your tax advisor won’t tell you, that’s not his job. Tax avoidance is your job. Because you know your individual financial situation best of all.

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Tax tips & tricks: recommendations + how to save taxes

Every year it’s time to file your tax return. For many people, this has been an annoying topic for years, but it doesn’t have to be! With the appropriate know-how and tips, you can often get a lot of money back, and the tax return is easy to do. We have compiled the most important and exciting tips and tricks for you in the form of popular books by experts, so that you too can save money and look forward to the next tax assessment in the future!

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Tip! Wealth building XXL: Finance, Investment & Co.

Who wouldn’t like to build up their own assets? Whether you want to be able to afford something or would like to generate a financial buffer for old age, asset accumulation is a relevant and, above all, sensible topic for virtually everyone. But what options are there for building up assets? Life insurance, retirement planning, or investing in real estate? Here you will find an overview of articles, as well as book and video recommendations on the subject of asset building. From saving taxes to passive income to tips on successful investing – experts and professionals share their know-how in their videos and readings and answer all questions about wealth accumulation.

• Book and Video Tips: Wealth Building XXL