Rental income from Germany? beware of DTR ( D ouble T axation R elief )!

I have a share in a german property in Hamburg which is creating some rental income for me.

As a non-resident (in Germany) I have to pay 25% to the German tax-man ( there is no way around that ).

Now the irish tax-man comes along, gives me some relief ( D ouble T axation R elief ) but then is charging me another 10%( aprox ) on the german income. So I end up paying roughly 35% on the german income. When appealing to the revenue I am told that's the way it's done and I can do nothing about it.

1 : beware all you potential buy-to-let-in-Germany
2 : if anybody could show me a way to reduce my tax-bill I would greatly appreciate it.

Re: Rental income from germany? beware of DTR !

A salutary warning. Anybody getting into any investment should investigate and understand - with the help of independent, professional advice if necessary - the tax issues involved in advance of making the investment.

Re: Rental income from germany? beware of DTR !

Double taxation arrangements are in place between Ireland and most developed countries - not just Germany. Anyone who invests in property abroad or who otherwise is in a position to receive foreign-sourced income is foolish if they don't arm themselves with the necessary tax expertise (if necessary including professional advice in both Ireland and abroad) at the outset and on an ongoing basis thereafter.

Re: Rental income from germany? beware of DTR !

im buying property in Hungary and going to be paying 25% tax over there and under double taxation agreement im expecting to pay at least another 17% because im on 42 % tax rate in Ireland to make up the differance thats the way i see my situation if anyone has any other suggestion as to how its done give me a shout my regards

Re: Rental income from germany? beware of DTR !

thomas said:

I have a share in a german property in hamburg which is creating some rental income for me. as a non-resident (in germany) I have to pay 25% to the german tax-man ( there is no way around that ). now the irish tax-man comes along, gives me some relief ( D ouble T axation R elief ) but then is charging me another 10%( aprox ) on the german income. so I end up paying roughly 35% on the german income. when appealing to the revenue I am told that's the way it's done and I can do nothing about it.
1 : beware all you potential buy-to-let-in-germany's
2 : if anybody could show me a way to reduce my tax-bill I would greatly appreciate it.

Click to expand...

Sounds bad Thomas - but when I looked into this last year my understanding was that you could a) offset all mortgage interest relief b) "depreiciate" the building and acquisition cost over 40-50 years and also offset other maintenance and management costs? Is this not the case?

Roy

Re: Rental income from germany? beware of DTR !

Hi Thomas,
I had some property in Germany for a while and found the tax sytem quite complex, but there's a lot of ways to get write-offs if you understand it eg. any expenses (curtains, furniture etc.) you can claim against it, flight tickets to Hamburg, interest paid w/o any caps like in Ireland... etc.
You mentioned there is no way around the 25%, have you already asked somebody in know about this, and how did they calculate the 25% ?
I haven't checked fully about the double tax relief with Ireland, since I was based in Germany when I had the property. How did the Irish revenue come up with the 10% numbers if you don't mind me asking ?
Darragh.
P.s. We plan to buy in Germany again this year...

Re: Rental income from germany? beware of DTR !

My understanding of how the system works is as follows

In Germany - you calculate your tax using the German system and pay it.

In Ireland you calculate your tax due as though the house was in Ireland
as follows

Rental income

Less
Mortgage Interest only
Insurance
Maintenance Fees
Fixtures & Fitting (write off over 8 years)
(there are others - these are the main ones)

Gross

tax @ 42% or 20% if this is your marginal rate

Less tax already paid in Germany

Re: Rental income from germany? beware of DTR !

hi darraghdog,
to clarify my situation :i did not invest, but inherited, so mortgage, interest, etc. does not apply. the property is managed by an agent who provides me with quarterly profit figures. these figures are presented to the german taxman and he demands from a non-resident 25%.
the irish revenue does not give me full credit for tax paid in germany but calculates my tax in a way which i do not understand : ( quote from a revenue-explanation letter " credit fo foreign tax deducted is given on your regrossed foreign income at the lower of the foreign effective rate or the irish effective rate, which in your case is the irish effective rat ".
anyway i end up paying approx. another 10% tax on my german income. since i am in the 20% tax-bracket it is quite hefty to pay 35% tax on foreign income. i would like to increase my property in germany by investing but this is holding me back.

Re: Rental income from germany? beware of DTR !

hi asdfg,
the last part of you message is not the way it is, although i think it should be so. the irish revenue does not honor the full amont of tax paid in germany but calculates your tax liability by a computerised process which bites another chunk out of your income. it seems that the irish revenue can legally do this but i am still hopefull that there is a way around this (legally of course). see also message to darraghdog.