Real estate transfer tax

Real Estate Transfer Tax - Real estate transfer tax is a one-time tax levied on the purchase of land or real estate in Germany. In Bavaria, the tax rate is 3.5% of the purchase price-the lowest rate among all federal states.

What exactly is real estate transfer tax?

Real estate transfer tax is governed by the Real Estate Transfer Tax Act (GrEStG) and is levied on every transfer of ownership of land and rights equivalent to land in exchange for consideration. In principle, the buyer is liable for the tax, although a different allocation may be agreed upon contractually. The tax is collected by the competent tax office as soon as the notary has submitted the notarized purchase agreement.

Without payment of the real estate transfer tax, the tax office will not issue a so-called clearance certificate. This is absolutely necessary for the land registry office to transfer ownership in the land register. In practice, this means: Without payment of the real estate transfer tax, no transfer of ownership takes place.

The tax base is generally the purchase price stated in the notarized purchase agreement. Movable items sold as part of the property-such as a built-in kitchen, awnings, or garden tools-can be listed separately and thus deducted from the tax base, provided the valuations are realistic and verifiable. In practice, the tax authorities often accept deductions for movable inventory up to an amount of approximately 10,000 to 15,000 euros without conducting a detailed review.

Certain acquisition transactions are exempt from real estate transfer tax. These include, in particular, acquisitions through inheritance or gift (which are subject to inheritance or gift tax), purchases between spouses or registered partners, and acquisitions where the purchase price is less than 2,500 euros (de minimis threshold). The transfer of real estate between direct relatives-that is, between parents and children-is also exempt from real estate transfer tax.

Tax Rates by Federal State

Bavaria, together with Saxony, levies the lowest real estate transfer tax rate in the country at 3.5%. By comparison, in North Rhine-Westphalia, Brandenburg, Schleswig-Holstein, and Saarland, the rate is 6.5%-almost twice as high. This locational advantage makes buying real estate in Bavaria financially more attractive.

For a condominium in Nuremberg with a purchase price of 350,000 euros, the real estate transfer tax amounts to 12,250 euros. If the same apartment were located in North Rhine-Westphalia, 22,750 euros would be due-a savings of 10,500 euros solely due to the lower Bavarian tax rate.

Real estate transfer tax is generally due within four weeks of receiving the tax assessment notice. Buyers should definitely factor this amount into their financing plan as an incidental purchase cost, as it cannot be financed through the bank loan-banks consider real estate transfer tax to be an equity contribution.

Practical Tip for Property Owners in Nuremberg and Franconia

When purchasing real estate in the Nuremberg metropolitan region, we recommend specifically optimizing the tax base for real estate transfer tax. Included fixtures such as built-in kitchens, sauna facilities, garden sheds, or high-quality awnings should be listed separately in the purchase agreement with realistic current market values. Our network of experts works closely with regional notaries who are familiar with the correct drafting of contracts.

An early review is particularly worthwhile for new construction in Nuremberg’s growing neighborhoods such as Thon, Röthenbach, or Langwasser: If the land is purchased separately from the construction contract, the real estate transfer tax may, under certain circumstances, apply only to the land price and not to the total construction costs-provided there is no single contract with the developer.

Frequently Asked Questions

Who is responsible for paying the real estate transfer tax?

By law, both the buyer and the seller are jointly and severally liable for the real estate transfer tax. In practice, however, the purchase agreement almost always stipulates that the buyer bears the tax alone. If the buyer fails to meet their payment obligation, the tax office may also hold the seller liable. Therefore, both parties have an interest in prompt payment.

Is real estate transfer tax tax-deductible?

For owner-occupied properties, real estate transfer tax is not tax-deductible. For rental properties, however, it is classified as an incidental acquisition cost and is taken into account for tax purposes over the building’s useful life as part of depreciation (AfA). Investors in the Nuremberg region should therefore include real estate transfer tax in their return-on-investment calculations.

What happens if the purchase agreement is rescinded?

If a purchase agreement is rescinded within two years of its conclusion, the real estate transfer tax already paid may be refunded upon application (Section 16 GrEStG). The prerequisite is that the rescission is actually carried out and the original status is restored in the land register. The application for a refund must be filed with the competent tax office.

Share Deals and Real Estate Transfer Tax

A special scenario involves share deals with corporations. Anyone who purchases shares in a company that owns the property, rather than the property itself, may avoid real estate transfer tax under certain conditions. However, the GrEStG has increasingly restricted this arrangement: As of 2021, real estate transfer tax is now due upon the acquisition of 90% of the company shares (previously 95%), and the relevant holding period has been extended from 5 to 10 years. Share deals are thus still possible, but significantly more restrictive than before.

For private buyers in the Nuremberg metropolitan region, the share deal is generally not an issue. For institutional investors and developers engaged in portfolio transactions, however, it remains relevant and requires careful legal and tax guidance.

Real Estate Transfer Tax on Purchases via Foreclosure Auction

Real estate transfer tax is also due when purchasing a property through a foreclosure auction. The tax base is the highest bid plus the assumed rights and encumbrances that remain in effect upon the award of the bid. The bidder should factor the real estate transfer tax liability into their calculations in advance: For a winning bid of 300,000 euros in Nuremberg, 10,500 euros in real estate transfer tax is due in Bavaria, payable within four weeks of receiving the tax assessment notice. A special feature of foreclosure auctions: The tax court has ruled that costs incurred by the purchaser for vacating and handing over the property-and which are assumed as part of the auction-may also be included in the tax base. We recommend that bidders in foreclosure auctions in the Nuremberg metropolitan region inform themselves about the full incidental purchase costs before participating to avoid unpleasant surprises.

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