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Holding real estate in Germany

Fund Structures and German Taxation at a Glance

Although decisions on investments in real-estate are not primarily tax driven, taxation plays an important roll. Not only the recent BEPS discussion but also further aspects of transfer-pricing, interest deduction and loss utilization play an increasing role in international tax structures.
Last but not least another important intention when administrating real estate is to hold the Propco free of German trade tax which can occur under specific circumstances.

The purpose of this document is to provide an overview – at a glance – of major tax aspects which are relevant for international investors planning to invest in German real estate.

LM as an independent accounting, auditing, tax compliance and law firm has a strong focus in real estate for many years thus enabling us to cover the full life-cycle of an asset. Due to our comprehensive relation-ships to various service providers in the field of real estate such as law firms, property managers and last but not least accounting & domiciliation providers domiciled in other jurisdictions such as Guernsey or Luxembourg we are in the position to serve as a one-stop-shop to drive your real estate project to success.
We will treat your real estate as if it was our own!

Should you seek for further assistance please do not hesitate to contact us.

Schlagwörter: Real-Estate/ Internationales Steuerrecht

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How to achieve a refund of land tax on real estate in case of vacancies?

Refund of property tax on real-estate according to the Federal Real Estate Tax Act

Real estate lessors whose property is vacant for a longer period can reclaim a part of their paid property tax on real-estate.

How to apply for the refund of property tax on real-estate?

The major requirement for the refund is a significant drop in rent income – mostly triggered by vacancies – which besides must not be provoked by action of the real estate owner. The benchmark for such reduction in rent income is the common rent for assets of same type, location and fitting. Therefore the refund is not granted in case the lessor terminated the rent contract during the relevant period i.e. with the target to execute an asset refurbishment. Requirements are subject to a close review of the tax authority.

Furthermore the lessor must prove that he has undertaken action to achieve a letting at a market oriented price. Documentation at an early stage of the attempts to find new tenants is highly recommended.

Which form and due time need to be considered for the application?

The request for the refund of the property tax on real-estate can be made informally at the municipal town or city authorities.

In the federal city states Berlin, Bremen and Hamburg the application should be addressed to the tax authority. The deadline – which cannot be extended – is always the 31st March of the following year. An extension of the deadline is impossible (cut-off date).

How much will be refunded?

In case that the reduction in rent-income is more than 50% a 25% discount of the property tax on real estate will be granted. If the asset was completely vacant in the relevant period 50% of the property tax on real estate will be refunded.

Contact:

Thomas Jäger, Partner, Tax Advisor

Robin Friedrich, Auditor, Tax Advisor

Tags: property tax on real-estate, vacancy, real estate tax, Real Estate

By Thomas Jäger, Partner, Tax Advisor, Robin Friedrich, Auditor, Tax Advisor, published 2014-02-24

Unsere News geben Veröffentlichungen jeglicher Art nur auszugsweise wieder. Für Informationsfehler können wir daher trotz Sorgfalt keine Haftung übernehmen. Individuelle Beratung im Einzelfall kann dies nicht ersetzen. Auf Inhalte von Internetseiten, die wir verlinkt haben oder auf die wir hinweisen, haben wir keinen Einfluss. Eine Haftung hierfür wird daher ausgeschlossen.

How to achieve refund of capital gains tax on dividends from minority shareholdings?

A European Court of Justice ruling in October 2011 (case C-248/09) has opened up the possibility of certain “old cases” becoming eligible for a refund of German capital gains tax. This applies to corporations with a limited tax liability which have their principal place of business and management in an EU/EEA state and no more than a 10% shareholding in domestic corporations. This possibility of a refund derives from the new regulation governing the taxation of what are referred to as free-float dividends, but only concerns those taxes on dividends received up to the 28th of February 2013.

Generally speaking, an informal application for a refund can be submitted to the German Federal Central Tax Office, but it must be accompanied by proof of compliance with the following criteria:

  • unlimited tax liability in the state the corporation is domiciled (place of management);
  • direct participation in the stock or nominal capital of the distributing company;
  • the corporation applying for the refund is the actual recipient of the dividends (shareholder) and the dividends are attributed to it for tax purposes;
  • the entitlement to a refund must not be excluded under Sec. 50d para.3 of the German Income Tax Act (the company applying for the refund is commercially active and neither natural persons nor third-country nationals have a shareholding in it);
  • no refunds are possible under other regulations (e.g. double taxation agreement);
  • in the state where the company is domiciled, the German capital gains tax may neither be attributed to the corporation submitting the application or to its shareholders, nor may it be deducted as an expenditure.

If the prerequisites are fulfilled, the capital gains tax is refunded based on a notice of exemption for all profit payments disbursed in a calendar year. The fulfilment of the above prerequisites shall be demonstrated by a certificate of the foreign tax authority. The limitation for applications for previous years is based on the general period of limitation applicable to taxes (four years).

According to our information, the German Federal Central Tax Office is currently preparing an appropriate form which can be submitted to the foreign tax office in order to certify that the above criteria are fulfilled. It remains to be seen when this form will be available and how the foreign tax offices will respond to it.

Contact:

Thomas Jäger, Partner, Tax Advisor

Ulrike Schmid, Tax Advisor

Tags: tax advice, capital gains tax, minority shareholding

By Thomas Jäger, Partner, Tax Advisor, Ulrike Schmid, Tax Advisor, published 2014-02-14

Unsere News geben Veröffentlichungen jeglicher Art nur auszugsweise wieder. Für Informationsfehler können wir daher trotz Sorgfalt keine Haftung übernehmen. Individuelle Beratung im Einzelfall kann dies nicht ersetzen. Auf Inhalte von Internetseiten, die wir verlinkt haben oder auf die wir hinweisen, haben wir keinen Einfluss. Eine Haftung hierfür wird daher ausgeschlossen.