ARTICLE · 27 JUNE 1995

018. Sale of German Real Estate by Foreign Persons

KPMG Germany

Explore more from KPMG Germany

GermanyTax

KPMG Germany Webpage
Click on the above link to visit the KPMG Germany webpage on the Mondaq website
For disclaimer and copyright see end of this article.

Prior to 1 January 1994 it was possible for foreign persons including foreign corporations to own and dispose of German real estate after a two year holding period without any German tax liability on the sale as long as they avoided creating a permanent establishment or having a permanent representative in Germany. Under many tax treaties, the gain on sale was also free of tax in the foreign person's country of residence. Germany's tax laws were, however, amended to reduce the possibilities for such schemes from 1994 on (new section 49 par. 1 no. 2 (f) EStG). It now is insufficient to avoid a German permanent establishment. Instead, business activity in Germany must be avoided altogether.

We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.

Register for freeORLog in

Related Articles

Trade Tax On Data Centers Starting In 2027 – Connection Capacity As A Tax Location Factor?

Greenberg Traurig

Can An Unmanned, Remotely Operated Plant Be A VAT Fixed Establishment? The BFH Asks The CJEU

Federal Fiscal Court: Future Insolvency Administrator’s Remuneration May Be Recognized As Provisions

BMF: Draft Bill Would Tax Exchange Crypto-assets As Investment Income

Bavarian Tax Authorities Comment On Tax Treatment Of Employee ‘Hurdle Shares’

Greenberg Traurig

Legal Intelligence Newsletters: sign up for the latest legal and regulatory news on your chosen topics

Read more about

Related Comparative Guides

Comparative Guide

Tax

Comparative Guide

Tax Disputes

See more popular content from

Tax

BMF: Draft Bill Would Tax Exchange Crypto-assets As Investment Income

Germany's Federal Ministry of Finance has proposed a fundamental shift in how exchange crypto-assets like Bitcoin and Ether are taxed, moving them from "other income" to investment income with a flat 25% tax rate. The reform abolishes the one-year tax-free holding period for new acquisitions while introducing withholding tax obligations for domestic crypto-asset service providers. How will these changes affect long-term investors, high-income earners, and the operational burden on crypto platforms?

Do I Have To Report Income From Abroad On My German Tax Return?

German tax residents must report worldwide income on their tax returns, including rental income from foreign properties and investment earnings from abroad.

GGI | Global Alliance

Germany’s Advance Lump-Sum Taxation (Vorabpauschale): Considerations For Non-German Fund Managers

Germany's advance lump-sum taxation regime imposes annual deemed investment income on German tax-resident investors in qualifying investment funds, regardless of distributions.

Beware Of Hidden Costs: Hiring Foreign Temporary Workers In Germany

When a German employer hires foreign EU workers for a short-term project without proper tax and social security documentation, what appears to be a cost-effective staffing solution can quickly transform into a financial burden. Through a detailed case study and sample calculations, this analysis reveals how routine audits can expose compliance gaps that nearly double the actual employment costs.

GGI | Global Alliance

Annual Tax Act 2024: Foreign Retirement Plan Reforms

Germany's Annual Tax Act 2024 (Jahressteuergesetz) brings tweaks to the country's Income Tax Act (Einkommensteuergesetz). Due to adjustments to Sec. 22 no. 5 sentence 2 of the act...

Flick Gocke Schaumburg

Tips For Avoiding An Accidental Unlimited Tax Liability Of A Foreign Corporation

The following case involves Germany on one side, but this example may be applicable for many other jurisdictions.

GGI | Global Alliance

Loss Forfeiture In The Event Of Share Acquisitions: New Developments In Judicial Review Proceedings

The German Federal Constitutional Court is set to rule on the constitutionality of Section 8c of the Corporate Tax Act, which mandates complete forfeiture of tax losses when more than 50% of a corporation's shares change hands. The Hamburg Fiscal Court has supplemented its 2017 referral order with new details about a specific case where losses would be forfeited solely due to share acquisition, raising fundamental questions about whether this provision violates Germany's constitutional principle of equality

Taxing a company acquisition in Germany

Corporate transactions in Germany present complex tax considerations for buyers and sellers, with fundamentally different implications depending on whether the deal is structured as an asset or share transaction. Understanding how capital gains taxation, real estate transfer tax, and depreciation rules apply to each structure is essential for optimizing after-tax outcomes and managing inherited tax liabilities.

GGI | Global Alliance

Fiscal Court Of Münster Clarifies Relevant Date For Assessing A Contribution In Kind Under Section 20 (1) UmwStG

The Fiscal Court of Münster has ruled on a critical question in German reorganization tax law: when assessing whether a contribution in kind qualifies for tax-neutral treatment, should authorities examine the circumstances on the actual contribution date or the retroactive tax effective date? This decision challenges longstanding administrative guidance and could fundamentally reshape how businesses structure tax-efficient reorganizations involving partnership interests and special business assets.

The End Of The Signing Closing Issue: The New Rules On German Real Estate Transfer Tax In Share Deals

Germany has enacted significant reforms to its real estate transfer tax rules for share deals, addressing the controversial issue of double taxation that previously arose when signing and closing occurred at different times. The new legislation establishes a clear hierarchy between tax provisions and extends notification periods, fundamentally changing how M&A transactions involving real estate-owning companies are taxed.