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Germany Amongst The Most Expensive Countries To Sell Your Home In

Germany Amongst The Most Expensive Countries To Sell Your Home In

Research conducted by Taxand, the world's largest independent global network of specialist tax advisors to multinational businesses, has shown that Germany is one of the most expensive countries in the world in which to develop and subsequently sell a residential property, with almost 20% of the value swallowed by tax.

The tax rate is the fourth highest of the 23 countries analysed in the research and is only a short way behind France which topped the table with a rate of 22.03% well ahead of other major economies such as the USA and the UK ranked 18th and 22nd respectively. Other countries with a considerably high total tax take for the sale of homes included the Netherlands (21.25%), Portugal (20.87%), and Turkey (18.92%).

This alarming tax take on a residential property sale in Germany is largely a result of the fact that VAT on the construction costs cannot be recovered. There is also a real estate transfer tax that applies to all property transactions in the country, combined with capital gains taxation. These are significant factors for property investors to consider when looking at purchases in the country given the attractive tax rates of neighbouring European jurisdictions.

The research identifies Malaysia as the cheapest location to sell a residential property where the tax take from the income of the sale stands at a astoundingly low rate of 5.40% and the UK is not far behind with a total tax take of just 6.39%.

Poland, Luxembourg and India are countries also boasting relatively attractive tax rates for the sale of residential property with rates of 11.04%, 11.68% and 12.09% respectively.

Ulrich Siegemund, Partner at Luther Rechtsanwaltsgesellschaft mbH, said: "A developer suffers 19% VAT on construction costs in Germany and there is no VAT refund possible for the landlord or the purchaser of the residential property at the end of the process due to the fact that residential property is exempt from VAT. This is the largest burden for the investor in terms of tax costs."

Keith O'Donnell, Global Head of Real Estate, at Taxand, also commented: "Our research throws up some interesting trends with regards to residential property within Europe as well as worldwide. Perhaps most interesting is the disparity shown in the rates within Western Europe with France topping the list alongside the Netherlands, Portugal, and Germany."

"Property investors may well be surprised by these results and in light of them consider a shift in their investment portfolios to less tax-heavy jurisdictions in order to boost overall profits. Certainly, with governments expected to reverse previous tax concessions in order to generate revenue, a growing number of investors could be tempted by the attractiveness of countries already exhibiting a lower tax take."

Also featured in FT Deutschland 14 January 2010

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Research methodology

To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes. The property taxes were usually subject to various country specific assumptions and modifications as they often differ on a municipality basis or sometimes just location basis.

Those were reviewed by the coordinating Taxand team to assure comparability. Administrative fees, notary fees, court fees were excluded as having a relatively low impact on the overall tax take.

To ensure comparability of the results, certain data has been fixed such as size of the building, investment costs, and 100 percent non-interest bearing equity financing. With all of that built into the model, each real estate team from Taxand adopted it to the local law to ensure comparability.

Your Taxand contact for further queries is:
Abigail Tarren, Global Operations Director
T. +44 (0)207715 5243

Taxand's Take

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