What tax regulations apply to the double taxation of real estate abroad?
July 13, 2023 | 120,00 EUR | answered by Albrecht Schneider
Dear tax advisor,
I am Bernhard Bauer and I own a property abroad. In this case, it is a holiday apartment in Spain that I rent out. I have recently learned that there may be double taxation when renting out properties abroad. I am unsure about the tax regulations that apply in my case and how I can protect myself from it.
Currently, I am already paying taxes on the rental income in Spain, as the income is generated there. Now I am concerned that I may also have to pay taxes in Germany, as I am a resident here. I am afraid that I will be double taxed and suffer a significant financial loss as a result.
My question to you as a tax advisor is: What tax regulations apply to the double taxation of properties abroad? Are there ways to avoid or at least reduce double taxation? How can I optimize my tax burden and what steps should I take in my individual case?
I look forward to your expert advice and thank you in advance for your support.
Sincerely,
Bernhard Bauer
Dear Mr. Bauer,
Thank you for your inquiry regarding double taxation of real estate abroad. It is understandable that you are concerned about possible tax burdens and are looking for ways to avoid or at least reduce double taxation.
In your specific case, where you are renting out a vacation home in Spain and already paying taxes on the rental income there, it is important to know that Germany follows a so-called residence principle in taxing income. This means that as a German taxpayer, you generally have to pay taxes on your worldwide income in Germany. There is therefore a risk of being double taxed if there are no provisions to prevent double taxation.
To avoid double taxation, there are various instruments and regulations that you can take advantage of. One of them is the Double Taxation Agreement (DTA) between Germany and Spain. This agreement regulates the taxing rights of the two countries to avoid double taxation. In general, such agreements specify which country has the taxing rights for certain types of income and how taxes can be credited or exempted.
It is advisable to consult with an experienced tax advisor to examine your individual case and determine whether and how the DTA between Germany and Spain is applicable to your situation. A tax advisor can also help you optimize your tax burden by suggesting possible tax planning strategies and assisting you with fulfilling tax obligations in both countries.
Therefore, I recommend scheduling an appointment with a tax advisor to receive comprehensive advice and clarify your tax situation. I am available for further questions and wish you success in optimizing your tax burden.
Best regards,
Albrecht Schneider
