The apartment rentals and other foreign real estate must of course also in the tax return can be specified. This is in fact not entirely straightforward, since according to the state in which the property is located abroad, the relevant double tax agreement (DTA) to be taken into account. Moreover, there was always the subject of dispute which losses from the rental of a property abroad is concerned.
Handling in the tax return, depending on the DBA
Double taxation treaties are bilateral agreements that the individual countries themselves close to a competing to regulate taxation and double taxation in both countries largely be prevented. Such a competitive situation is the hiring of foreign real estate, where.
Because of the state in which the property is located, will certainly collect taxes as well as the Federal Republic in which the citizen resides abroad the property holds. When renting is therefore depending on double taxation treaties fundamentally two different alternatives to taxation. A distinction between the exemption method and the imputation method.
Previous handling of foreign property
If the property is due to the regulations of the respective foreign real estate is located in the exemption method provided the subject of income from the rental in Germany but not the income tax have been made within the tax return only to the progression subject.
During progression, the income from the foreign property itself is not the taxation, but simply increase the tax rate so that the bottom line but an increase in income from taxation clarification shows. The term "exemption procedure" is a bit confusing, because a complete tax exemption of profits from the rental of real estate abroad in the tax will not take place.
When imputation methods, however, the legislature has given the income from renting the property abroad in the tax into account, but then the taxes paid abroad on the German income tax requirements. In this way, is also here to prevent double taxation.
Losses of the foreign real estate so far outside
The losses from the rental of real estate abroad, however, the legislature has so far banned from the tax return. Only to these unjust Vorgehendweise clearly points out: If one gains from the hiring of foreign real estate has made, the legislature wanted it very well in the German tax clarification subject to taxation.
If, however, from the hiring of foreign real estate losses made by the legislature refused to them in reducing the tax clarification to be considered. This approach, however, cries out for a breach of the European law, so the problem around the property to foreign countries before the European Court of Justice has been driven.
Case law on the foreign property
If the Treasury is transverse, are also asking the courts and with respect to issues related to the recognition of losses from the rental of real estate abroad, there is now a ruling from the European Court of Justice. This is clearly stated that the refusal of the German state has a negative progression due to a loss from the rental of real estate abroad in the tax to allow a clear breach of European law is vested.
A different conclusion could also not exist. The verdict carries the file number C-152/03. The Bundesfinanzhof has in consequence to the ruling before the European Court of Justice brought the case then also decided that the losses from the rental of real estate abroad in the tax through the negative progression into account. The decisions, however, only cases of the exemption process. Whether a loss in the imputation procedure in mind, say the judges are not.
