Real Estate Law Germany
Real estate law in Germany: Property purchase for foreigners, share deals, commercial leases, project development. Advisory for investors and companies. Free initial consultation.
In summary: Real Estate Law Germany: No restrictions for foreign buyers. Ancillary costs 7-15% (transfer tax 3.5-6.5%, notary, broker). Share deals for tax optimization with <90% shares. Rental income: ~30% taxes (corporation). Capital gains tax-free after 10 years (individuals).
Real Estate Law in Germany
The German real estate market is one of the largest and most stable in Europe. With clear legal frameworks, a transparent land registry system, and no restrictions for foreign investors, Germany offers attractive opportunities for real estate investment.
Buying Property in Germany
No Restrictions for Foreigners
Germany has one of the most open real estate markets in the world:
- EU Citizens: Unrestricted acquisition
- Third-Country Nationals: No approval required
- Foreign Companies: Can acquire directly
- No Residency Required: Non-residents can also buy
- Exception: Agricultural land (regional permits)
The Purchase Process
- Contract Negotiation: Price, terms, due diligence
- Notary Appointment: Notarization is legally required
- Priority Notice: Security in land register
- Purchase Price Payment: After notary's payment notice
- Title Transfer: Registration in land register (2-4 months)
Required Documents
- Valid passport or ID card
- Tax identification number (or application)
- Proof of financing or bank confirmation
- For companies: Commercial register extract, powers of attorney
Ancillary Costs When Buying Property
| Cost Type | Amount |
|---|---|
| Real Estate Transfer Tax | 3.5% - 6.5% (depending on state) |
| Notary Fees | 1.5% - 2.0% |
| Land Registry Fees | 0.5% |
| Broker Commission | 3% - 7% (often split) |
| Total | 7% - 15% |
Transfer Tax by Federal State
| State | Tax Rate |
|---|---|
| Bavaria, Saxony | 3.5% |
| Hamburg, Baden-Württemberg | 5.0% |
| Berlin, Hesse | 6.0% |
| NRW, Schleswig-Holstein, Thuringia | 6.5% |
Share Deal vs. Asset Deal
Asset Deal (Direct Property Purchase)
- Object: Land/building itself
- Transfer Tax: Full tax rate applies
- Advantages: Simple structure, clear legal position
- Disadvantages: High transaction costs
Share Deal
- Object: Shares in a property-holding company
- Transfer Tax: Only if acquiring ≥90% of shares
- Advantages: Tax savings on large transactions
- Disadvantages: More complex structure, due diligence required
Transfer Tax for Share Deals
| Share Acquisition | Transfer Tax |
|---|---|
| < 90% | No transfer tax |
| ≥ 90% | Full transfer tax |
| Holding Period | 10 years for subsequent share transfers |
Note: Share deal regulations were tightened in 2021. The threshold was lowered from 95% to 90%, the holding period increased from 5 to 10 years. Careful structuring is required.
Real Estate Taxation
Rental Income
| Owner | Taxation |
|---|---|
| Individual (resident) | 14-45% income tax + solidarity surcharge |
| Individual (non-resident) | Limited tax liability, usually 25% |
| GmbH | 15% CIT + 5.5% solidarity + ~14% trade tax ≈ 30% |
| Foreign Company | Limited tax liability on German income |
Deductible Costs
- Depreciation: 2-3% p.a. of building costs
- Interest: Financing costs fully deductible
- Maintenance: Repairs and renovation
- Management Costs: Property management, tax advisory
- Insurance: Building insurance, liability
Capital Gains
| Situation | Taxation |
|---|---|
| Individual, holding <10 years | Speculation tax (personal tax rate) |
| Individual, holding ≥10 years | Tax-free |
| GmbH | ~30% on capital gains |
| GmbH Holding | 95% tax-free for shares ≥10% |
Commercial Lease Law
Differences from Residential Leases
- Freedom of Contract: Largely free agreements possible
- No Tenant Protection: Fixed terms common (5-10 years)
- Index Rent: Linking to consumer price index possible
- Turnover Rent: Additional rent based on business turnover
- Triple-Net: Tenant bears all ancillary costs
Typical Contract Clauses
- Minimum Term: Usually 5-10 years
- Extension Options: For the tenant
- Competition Protection: No letting to competitors
- Subletting: Regulation of permissibility
- Restoration Obligation: At lease end
Project Development
Approval Procedures
- Preliminary Inquiry: Pre-clarification of approval
- Building Permit: Review by building authority (3-6 months)
- Development Plan: Decisive for type and extent of building
- Monument Protection: Additional permits for historic buildings
Due Diligence for Projects
- Legal Review: Land register, encumbrances, third-party rights
- Technical Review: Building condition, contamination
- Tax Review: Optimal structure, input VAT deduction
- Planning Law Review: Development possibilities
Property Structures
Direct Ownership
- Simple and transparent
- 10-year speculation period for individuals
- High tax burden on sale within the period
GmbH Structure
- Trade tax on rental income (~30% total)
- No speculation period
- Easy share transfer (share deal)
Holding Structure
- Holding owns shares in property GmbH
- 95% tax exemption on dividends and sale
- Optimal for long-term investors
Fund Structure
- Special AIF for institutional investors
- Professional management
- Regulated structure with investor confidence
Our Services
- Purchase Contracts: Review and negotiation
- Due Diligence: Legal review of properties and companies
- Structuring: Tax-optimized acquisition structure
- Commercial Leases: Drafting and negotiation
- Project Development: Legal support
- Disputes: Lease law, construction law, neighbor law
Frequently Asked Questions
Yes, Germany has no restrictions for foreign property buyers. EU citizens and third-country nationals can acquire real estate without limitations. There is no residency requirement or approval needed. Only agricultural land may require regional permits.
Ancillary costs amount to 7-15% of the purchase price: Real estate transfer tax 3.5-6.5% (depending on state), notary 1.5-2%, land registry 0.5%, broker commission 3-7% (usually split). In expensive states like NRW or Berlin it is around 15%, in Bavaria closer to 10%.
In an asset deal, the property is purchased directly, full transfer tax applies. In a share deal, you buy shares in a company that owns the property. If acquiring less than 90% of shares, transfer tax can be avoided. Share deals are common for larger transactions.
The process: 1) Purchase contract draft by notary, 2) Notarization (both parties), 3) Priority notice in land register, 4) Purchase price payment, 5) Title transfer in land register. Settlement takes 2-4 months. Without notary, the purchase is void.
Individuals: Income tax 14-45% + solidarity surcharge on net rental income. Corporations: 15% CIT + 5.5% solidarity + ~14% trade tax = ~30%. Depreciation (2-3% p.a.) and financing costs are deductible. Sale after 10-year holding period is tax-free (individuals).
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