Holiday apartment on Rügen without a German residence permit
May 30, 2012 | 30,00 EUR | answered by Michael Herrmann
Hello,
I am German, married to a Swiss, residing in Switzerland where I also work and pay taxes. Now we would like to buy a holiday apartment in Germany (probably on Rügen), which we mainly want to rent out (season from May - Oct.), and only use ourselves for 1-2 weeks per year.
My question: Do we have to pay tax on the income in Germany, even though we do not have a residence there?
If yes: how are rental income taxed? Can advertising costs for renting, as well as the interest on a financing loan, be deducted against the sales tax (because we still do not pay taxes in Germany that we could reduce)? Is there a tax-free allowance for rental income?
Thank you.
Best regards,
Sonja Burger Demuth
Dear questioner,
First of all, thank you very much for your inquiry, which I would like to answer based on the information provided and considering your efforts in the context of an initial consultation. The response is based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Income from renting out the holiday apartment is subject to limited tax liability in Germany. Renting out holiday apartments can result in income from business operations as well as income from renting and leasing. Business income is assumed if the apartment is located in a holiday complex with a large number of similar apartments, central marketing is carried out, and a hotel-like management exists.
In all other cases, income from renting and leasing is generated. You are taxed on the surplus of income over deductible expenses. Deductible expenses include all costs incurred in connection with renting out the property. In addition to ongoing costs, these include interest on loans and depreciation (percentage of the purchase price for the building). Normally, a depreciation of 2% over 50 years is applied. Expenses for apartment rental are also deductible.
Self-use does not generate income, so the costs allocated to the period of self-use cannot be deducted as expenses. Self-use also includes the period in which the holiday home is neither rented out nor actually used by the taxpayer, but is available for use at any time. Vacancy periods are not considered self-use, but renting out, if the taxpayer presents circumstances that exclude self-use. An apartment is kept exclusively for rental if the owner hires a rental organization to rent out the apartment and only grants themselves fixed periods of use. Therefore, deductible expenses should be reduced according to the self-use.
Limited tax liability eliminates all tax benefits for residents, especially the basic tax-free allowance of €8,004. Therefore, positive income becomes taxable from the first euro. The initial tax rate in 2012 is 14.77% income tax including solidarity surcharge. Value-added tax is only levied on income from renting and leasing if you opt for it or if commercial income exceeds €17,500.
I hope that these details have provided you with a sufficient overview of the situation within the scope of your efforts and this initial consultation.
Best regards,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax consultant
