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Real Estate Transfer Tax – German States Report Record Revenues

Many places in Germany have seen massive estate transfer tax hikes in recent years. For the German states, they seem to have paid off, to say the least. According to the BFW Federal Association of Independent Property and Housing Companies, revenues from the real estate transfer tax have lately set a new record. All things considered, 5.3 billion euros were flushed into the states' coffers during the first six months of the year. An estimate by the Federal Statistical Office suggests that the total revenue from the tax will for the first time exceed the ten billion euro mark by the end of this year. This would mean that the real estate transfer tax collected by the states would be nearly twice the amount registered as recently as 2010. Back then, the sum of 5.3 billion euros represented the year-end total.

Real Estate Transfer Tax is Causing Ancillary Acquisition Costs to Soar

Pursuant to a special waiver of the interstate tax revenue equalisation, the states do not have to share their extra revenues from the real estate transfer tax with less affluent states, but may forward them to their own municipalities instead. This arrangement has been a powerful incentive to keep raising tax rates – literally at the expense of property owners. For the latter, the steady increase in real estate transfer tax implies a substantial extra financial burden when buying real estate. After all, the incidental costs are high enough as it is, given that notarial charges tend to average two percent and estate agent fees can go as high as 7.1 percent. Here is an example: Buying a property in Schleswig-Holstein with a price tag of 400,000 euros would incur an added amount of 62,560 euros in ancillary acquisition costs today.

Bavaria and Saxony the only States still Charging a Tax Rate of 3.5 Percent

The tax hikes, some of them hefty, started in 2006, when the federalist reform in Germany left it up to the states themselves to set the rate for their local real estate transfer tax. Among the country's sixteen states, the tax rate has been raised no less than 26 times, according to the BFW. The only states that left the original rate of 3.5 percent in place are Bavaria and Saxony. Elsewhere, the going real estate transfer tax rate is four percent in Hamburg, and five percent in Baden-Württemberg, Bremen, Hesse, Mecklenburg-Western Pomerania, Lower Saxony, Rhineland-Palatinate, Saxony-Anhalt, and Thuringia. Property buyers in Berlin pay an even stiffer rate: Here, the real estate transfer tax equals six percent of the purchase price. The highest rate of 6.5 percent is levied in the states of Saarland, Schleswig-Holstein, North Rhine-Westphalia, and Brandenburg.