Heussen & Schalast
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
Anyone (including foreigners) can own and occupy real estate (including shares in property owning companies) in Germany.
There are in general no restrictions regarding the person owning and occupying real estate in Germany. However, special attention must be paid in case the property forms part of an intended acquisition of a German company for which the statutory review rights of the German government under the Foreign Trade and Payment Act apply. In particular, in case a (non-EU) foreigner intends to acquire more than 10% of the voting rights in a German company that belongs to a particularly security-relevant sector (e.g. operators of critical infrastructures), the authorities are entitled to issue orders with regard to the acquisition or prohibit it altogether.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
To the extent the borrower, the borrower’s controlling (ultimate) shareholder or the borrower’s jurisdiction of incorporation is not listed on a (German or EU) sanction list, there are no restrictions on lending to foreign companies for the purchase of real estate in Germany.
An indirect restriction may result from the lenders know your customer checks: If due to (i) lack of transparency of the foreign jurisdiction of incorporation of the borrower and/or (ii) the borrower’s lack of cooperation, the lenders are not able to complete sufficient know your customer checks, they might be prevented from lending.
Buying
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
The acquisition of German real estate by way of an asset deal triggers statutory fees of the notary public ranging from 1.2% to 1.5% of the purchase price.
For the registration of the legal title a registration fee is to be paid to the land registry. Further, Real Estate Transfer Tax (RETT) is triggered by transfer of German real estate. Depending on the Federal State where the real estate is located, this might be 3.5 % to 6.5 % on the purchase price. In turn, the German VAT does generally not apply to the sale and purchase of real estate.
For transactions related to the shares of a (German or foreign) company holding (directly or indirectly) German real estate, RETT may equally be triggered depending generally on a threshold of 90%.
Owning
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner
Owners of real estate in Germany are subject to an annual property tax. The tax base is the ‘assessed property value’, which is determined under the reformed 2025 property tax regulations. Tax amount depends on several factors like location, size, use and the local municipal coefficient. The property tax can be fully passed on to any contractual occupier (incl. tenant) if contractually agreed.
Municipal trade tax is not triggered by the ownership itself (passive leasing of property by a foreign entity generally not considered creating a permanent establishment), but the rental income will generally be subject to German (corporate, 16.375%) income tax (also under the tax treaties).
A specificity of German tax law is that – depending on the various tax treaties – in principle interest income secured by German mortgage makes the holder subject to limited tax liability (subject to filing).
Tax Breaks
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so, what are they?
Under German law, there are no special incentives favouring foreign buyers of real estate. However, there are possibilities to mitigate the tax burden by using tax-efficient corporate structures in view of avoiding German municipal trade tax. E.g. the real estate transfer tax might be avoided under statutory law if the property is acquired via a share deal under certain circumstances.
Often, it makes sense to invest via foreign entities (including investment funds) to avoid German trade tax (which may be higher than the corporate income tax).
How is the ownership of Real Estate evidenced in your jurisdiction?
Legal title to German real estate is evidenced by registration of the owner in the public land register. The land register is a special division of the local court where the real estate is located (there is no nationwide land register in Germany).
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
The identity of real estate owners in Germany is kept confidential to a certain extent: The ownership title is registered in the land register. The inspection of the land register requires the owner’s consent or else a justified interest. Regarding the latter, the (mere) interest of a potential buyer is not sufficient. In case the property is owned by a legal entity and access is granted to the land register, the identity of the natural shareholders of most forms of German legal entities is subsequently obtainable via publicly available corporate registers. Furthermore, German and foreign legal entities alike that own German real estate are required under the Anti-Money Laundering Act to report their beneficial owners to the publicly available German transparency register.