Germany second cheapest country for tax on commercial rent

A report produced by global tax advisory organisation Taxand says that Germany is the second cheapest country in the world for investors involved in developing and renting commercial property in terms of the total tax take. Only Switzerland ranks behind Germany in this category, says the report.

The Taxand report concludes that the total tax rate on development of commercial property for rent in Switzerland is the cheapest in the world at 14.01%, followed by Germany with 14.57%. According to Ulrich Siegemund, head of real estate at Taxand Germany, “Germany is not a high tax country for real estate investors and is particularly favourable for corporate investors. One reason is that municipal trade tax can be avoided, which reduces tax to 15.825 % on the net income from rent.”

These rates contrast with those countries at the other end of the table, such as the USA, which has a total tax take of 40.99% on commercial rent. Germany’s rate in this sector has increased marginally since the last Taxand T3 (“Total Tax Take”) research in 2011 when it stood at 14.53%.

The Taxand report covers four categories of asset type in 20 countries around the world: Residential for sale, Residential for rent, Commercial sale, and Commercial rent.

In the other categories, Germany generally features around the average rate, although is amongst the cheaper countries for the rental of residential properties, where the total tax rate is 26.00%, still more attractive for investment compared to Argentina, which has the highest rate in this category of 44.00%.

In a number of cases, European countries appear as the most attractive locations for real estate investment, with the UK, Luxembourg and Switzerland amongst the cheapest in terms of tax take across the four segments analysed in the research. Given the ability to recover VAT on construction in Poland and Romania, along with their low prevailing income tax rates, meant that these two countries top the list as the most attractive for commercial development and sales.