Majorca Property News

Foreign real estate tax case

A charming chalet in Switzerland, a finca in sunny Spain, or a gorgeous house with a pool in Florida: More and more German citizens have property abroad.

Estimated to have now more than one million German a property outside the national borders, in the mountains or the sea increased.
"Tax considerations when purchasing these properties abroad rarely attention. They lurk some of the tax traps, with which the least expected," warned Jens Scharfenberg, Partner at MDS Möhrle, firm for audit, tax, business law (based in Hamburg, Berlin , Schwerin).
Even when you buy it - depending on foreign law - cause not only the usual, nationally-related taxes such as the land costs. This allows the buyer of foreign tax authorities for value added taxes are used, normally the seller owes. For the buyer an unpleasant situation, since he must seek the money from the seller in return to get reimbursed. Should the cottage abroad exclusively be used, there are tax consequences first - apart from the current national or local taxes - if the object is sold, given away or inherited it. Because of the current taxes in foreign countries is a recommendation by Jens Scharfenberg, before buying strictly professional advice on the spot or to be an expert here.
In any event falls on the sale of such an exclusively used for its own purposes only apartments abroad income tax. "In the shoals of international tax law gets you in gifts and inheritance cases. In most cases, to both Germany and the foreign state inheritance or gift tax levy and collect," the experience of the expert advisors for international tax law. Since Germany only very few double inheritance taxation agreements with other states has taken leave of the double taxation in most cases only on a "credit" of the foreign inheritance tax on the German solve. However, given that the credit will never be a refund in Germany, the legacy is the higher level is subject to inheritance tax. "To ensure high levels of foreign unpleasant to avoid inheritance tax, it may be, the property is in a German corporation involved," advises Jens Scharfenberg. Depending on the foreign inheritance tax law could also borrowing abroad to support the objective, to reduce taxes.
Abroad who holds or acquires property, it should also note that it is not obvious, foreign land ownership under German law to inherit. Even the German recognition of wills is not self-evident. So if you valuable real estate abroad is, it should still take precautions during your lifetime, so the advice of tax professionals.
Furthermore, it is important to note that German, which have a holiday home abroad, not necessarily from a perhaps lower-income levels can benefit. Here is the principle: As long as you're in Germany or maintains a residence here usually resides, remains in Germany with his income tax liability. From the income tax obligation will only be dismissed in this country who finally lost his tents and no German has more domestic assets. Owners of vacation property can thus their tax status by foreign real estate hardly improve. But that is when most of them probably unlikely anyway in the foreground. Too big is the profit, the sun, mountains and Dolce Vita promise!