Provision-free transfer of ownership apartment
July 4, 2011 | 30,00 EUR | answered by Michael Herrmann
My daughter, who lives abroad, wants to buy a condominium in Germany, which is supposed to be used rent-free by me (the mother). I will only cover the monthly maintenance costs. How does taxation work in this case? Does my daughter have to pay second home tax when providing the property rent-free to me? Can the deductible expenses still be claimed by my daughter? If a fictional rental agreement should be established with payment of 66% of the local comparative rent, is the presentation of the rental contract sufficient as proof to the tax office, or does the flow of payments need to be proven through bank statements?
Dear inquirer,
first of all, thank you for your request, which I am happy to answer based on the information provided and in the context of your 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.
The tax-free transfer of the apartment would be a tax-irrelevant event, as no income is generated. Therefore, no deductible expenses can be claimed. Deductible expenses require the intention to generate rental income. The same applies to a transfer agreed at less than 50% of the local rent.
A "fictional" rental agreement is not sufficient to generate rental income. Especially in recent years, rental agreements with relatives are subject to strict scrutiny, where the payment flow must also be proven.
You can claim full deductible expenses in an officially conducted rental agreement that withstands an external comparison, and where the agreed gross rent is at least 75% of the local rent. If it is between 50% and 75%, a long-term positive surplus forecast must also be provided.
Second home tax must be paid if the municipality levies a second home tax and the apartment is not the main residence of the occupant.
I hope that these details have given you a sufficient overview of the situation in the context of your inquiry and this initial consultation.
Kind regards,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax Consultant
