New tax rules divide owners. If there is rental income from overseas property exists a divided world: With the Finca in Majorca, taxes can still be saved with the villa in Tuscany not. Why is that?
Following a European Court of Justice, the German legislature had to reform the taxation of foreign rental income. Since 2008, now apply new tax rules for foreign rental income and losses. Since then, it is very essential to the country in which the property is located. For there are different tax treaties with individual EU countries. Anyone who buys a property abroad, and these rents should be accurately informed as to whether the tax agreement with that country provides for the exemption method or the credit method, explains Peter Kauth 24th of Steuerrat
Exemption method
The exemption method is generally the case within the EU countries plus Norway and Iceland. An exception is made for Spain. This method ensures that both positive and negative rental income from a property in the German taxation remaining outside (section 32b para 1 Income Tax Act). The previous positive progression is no longer valid, that is, positive rental income from abroad in Germany no longer lead to an increase in the tax rate on the remaining income. The same applies vice versa for Mietverluste. You do not reduce the tax rate more of the taxpayer.
Rent possible gains or losses can be made only in the foreign law. However, should this be relevant to the least of German taxpayers, because who has achieved revenues in Italy, Greece or Croatia? Should occur in individual foreign income, is for property owners, however, usually provide a profitable loophole: Many countries tax allowances. This will keep rental profits partially exempt and must not be nachversteuert in the home country.
Equality of arms?
The justification for failure to losses in foreign Einkunftsermittlung the federal government stated in the field, that rental profit would be covered - ie there is at this point equality of arms. Tax experts like Peter Kauth criticize, however, that most foreign property would generate losses and the government with the denial of the deduction would only save expenditure.
The credit method is within the EU countries of the exception. It allows foreign rental benefit or losses in full, with revenues in Germany will have to. This applies for example for Spain, but also in Switzerland and Finland. Positive income must be taxed as before, both in abroad and in Germany, however, the foreign tax credit paid in the country, said Kauth. Unlike in the past may now also have negative rental income in the full amount be offset against positive income. Thus, foreign Mietverluste treated as such, from the property in Mallorca, domestic Mietverlusten, says tax expert.
If the property occupied?
Who wants to tax benefits claim must be noted, however one important detail: If the house or apartment abroad temporarily occupied themselves, owners need to recognize tax losses of a positive earnings forecast. In plain language: No later than the expiration of 30 years, the cost for the property plus the turn. Anders does the thing, if the object is only rented out. Then the legislature should imply a Einkunftserzielungsabsicht. Notwithstanding the hiring practice, the tax rules, if the property will be sold in Spain. Then there is a resulting saving in Germany always win tax-free, but it must be taxed for it in Spain.