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Investment climate

What is the general climate of real estate investment in your jurisdiction?

Real estate prices are expected to continue to rise in 2017 as well, although the price increases are likely to be smaller compared with previous years. The low interest rates and the Brexit decision will continue to affect German real estate positively.

In spite of the ongoing price developments and global political changes, the German real estate market is stable and thus remains attractive for investors.


Who are the most common investors in real estate?

Germany has retained its leading position for overseas investment, not just from Asia but also from many neighbouring European countries, including France and the United Kingdom. This trend is likely due to the geographical attractiveness of Germany’s location within Europe and the easy access to the rest of Europe and the world that this offers.

Are there any restrictions on foreign investment in real estate?

As a leading global economy, Germany provides safe and transparent market conditions. The German government welcomes overseas investors and the legal system is reliable.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

Investment in German property can be structured as an asset deal or a share deal. The advantage of an asset deal is that the risk profile of the transaction is limited (in particular, regarding the potential (tax) liabilities of an existing company acting as the seller of real estate). On the other hand, a share deal may be advantageous in respect of mitigating German real estate transfer tax as a result of tax structuring.

There are several ways to invest in real estate in Germany. An individual can purchase a property directly or the investment can be made indirectly using a German corporation or partnership. Alternatively, the property can be acquired using a non-German corporation or partnership.

Investment in German property often takes the form of indirect investment via single corporations or partnerships that acquire the property (with the investors holding shares or interests in that entity), or by using a holding company that is the shareholder in one or more subsidiaries, each of which may own one or several properties. Further, such investment vehicle can be domiciled either in Germany or a foreign country.

For many transactions involving investment into German real estate by overseas investors, the investor establishes a new company outside Germany (but within the European Union) to serve as the property owning company (‘propco’). The purpose of the propco is to hold, manage and rent real estate assets. Such structures are aimed at limiting the German taxation to corporate income tax (15% plus solidarity surcharge, which results in an effective tax rate of 15.825%) and at excluding further taxation in the form of German trade tax or German withholding taxes. A typical legal form used for such types of transaction is a Luxembourg Sàrl or a Dutch BV. Depending on the relevant double tax treaty, other countries can also provide similar tax structuring options.

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