Taxing rental income from Germany without a residence in Germany
Anyone who lets a flat in Germany but lives abroad has limited tax liability (beschränkte Steuerpflicht) in Germany on this rental income. Under double taxation agreements, the right to tax generally lies with the country in which the property is located. This article explains the basic principles; the calculation in the individual case is a matter for a tax adviser.
Limited tax liability
Natural persons without a residence or habitual abode in Germany are subject to limited tax liability on their German income. Under § 49 (1) no. 6 EStG, this income includes income from letting and leasing real property located in Germany.
There is no tax deduction at source; the income is assessed via an income tax return in Germany. Under § 19 (2) of the Fiscal Code (Abgabenordnung), the competent office is generally the tax office in whose district the flat is located (for several properties, the one with the most valuable assets).
No basic tax-free allowance – with one exception
Taxpayers with limited tax liability are taxed at the normal progressive rate, but under § 50 (1) sentence 2 EStG their taxable income is increased by the basic tax-free allowance (Grundfreibetrag). In practice, this means the tax-free basic amount, which is 12,348 € in 2026, does not apply; even small surpluses are taxed.
Anyone who earns almost all of their income in Germany (at least 90 %, or foreign income below the basic tax-free allowance) can apply under § 1 (3) EStG to be treated as having unlimited tax liability. This rarely applies to typical investors with income in their home country.
Depreciation (AfA) on the building
Only the building's share of the acquisition costs is depreciated, not the share for the land. Under § 7 (4) EStG, straight-line depreciation (lineare AfA) is 3 % per year for residential buildings completed after 31 December 2022, 2 % for those completed between 1 January 1925 and 31 December 2022, and 2.5 % for those completed before 1925.
For new rental residential buildings whose construction began after 30 September 2023 and before 1 October 2029 (or, where the purchase contract falls within this period, in the year of completion), declining-balance depreciation (degressive AfA) of 5 % of the residual value is possible as an alternative (§ 7 (5a) EStG). Whether it is more favourable for you should be calculated by your tax adviser.
Income-related expenses (Werbungskosten)
Deductible items include, in particular, loan interest, the parts of the service charge (Hausgeld) that cannot be passed on to the tenant (such as the property manager's fee), repairs, the costs of rental management, travel and advisory costs, and depreciation (AfA). In practice, contributions to the owners' association's maintenance reserve (Erhaltungsrücklage) only become deductible once the association actually spends the money on maintenance.
Beware of renovations shortly after purchase: if repair costs in the first three years exceed 15 % (net) of the building's acquisition costs, they are treated under § 6 (1) no. 1a EStG as acquisition-related production costs (anschaffungsnahe Herstellungskosten) and only take effect via depreciation.
Tax return and deadlines
The return must be filed for each calendar year. Without a tax adviser, the deadline under § 149 (2) AO generally ends at the end of the seventh month after the end of the year (31 July); longer deadlines apply with a tax adviser. Keep the purchase contract, service-charge statements, tenancy agreements and receipts in good order.
Double taxation agreements
Under Germany's double taxation agreements – in line with Art. 6 of the OECD Model Convention – the country in which the property is located has the right to tax. Depending on the agreement, your country of residence exempts the income (often subject to progression) or credits the German tax. How your home country proceeds depends on the respective agreement and your national law.
Sources
- https://www.gesetze-im-internet.de/estg/__49.html
- https://www.gesetze-im-internet.de/ao_1977/__19.html
- https://www.gesetze-im-internet.de/estg/__50.html
- https://www.finanz-tools.de/einkommensteuer/grundfreibetrag-tabelle
- https://www.gesetze-im-internet.de/estg/__1.html
- https://www.gesetze-im-internet.de/estg/__7.html
- https://www.gesetze-im-internet.de/estg/__6.html
- https://www.gesetze-im-internet.de/ao_1977/__149.html
- https://www.agenziaentrate.gov.it/portale/schede/pagamenti/imposta-sul-valore-degli-immobili-estero-ivie/base-imponibile-e-aliquota-scheda-ivie
- https://www.agenziaentrate.gov.it/portale/Schede/Pagamenti/Imposta+sul+valore+degli+immobili+estero+Ivie/Versamento+e+dichiarazione+scheda+IVIE/?page=schede
- https://sede.agenciatributaria.gob.es/Sede/todas-gestiones/impuestos-tasas/declaraciones-informativas/modelo-720-decla_____sobre-bienes-derechos-extranjero_/preguntas-frecuentes.html
- https://taxdown.es/inversion-acciones-bolsa/modelo-720
- https://bofip.impots.gouv.fr/doctrine/pgp/2587-PGP
- https://rechtsanwalt-griechenland.de/wp-content/uploads/2026/07/Doppelbesteuerungsabkommen_Deutschland_Griechenland.pdf
- https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar
- https://www.gov.uk/tax-foreign-income
Frequently asked questions
Do I have to file a return even if I make a loss?
Filing a return is advisable so that losses can be determined and offset against later surpluses from German sources. Whether there is an obligation is clarified by the tax adviser or the tax office.
Is the tax withheld from the rent?
No, there is no withholding tax on private individuals' rental income; the tax is determined by assessment.
Which depreciation rate applies to a period building from 1910?
For buildings completed before 1 January 1925, straight-line depreciation (AfA) is 2.5 % per year.
General information, as at October 2026. It does not replace advice from a tax adviser, solicitor or notary.
