income tax break when mortgagin property in Germany?

[spirelli]

We live in the UK and are planning to buy two apartments in Germany (Berlin) as an investment, buy to let.

We are wondering what the tax will be exactly, i.e. what percentage of rental income (and would we pay anything in addition in the UK)?

We will get a mortgage in Germany and know that if we were earning in Germany we could get a tax break for the interest we pay. Does a similar tax break apply to our income tax that we pay in the UK?

Would be grateful for further information.

 

[investinvalue]

Spirelli,

You would be paying about 25% tax on net income ie minus interest for mortgage, management / maintenance expenses and also minus a 2% depreciation amount of the value of the building i.e more or less purchase cost + major improvement work - value of land. Do not forget that you will most likely still have to pay taxes in the UK on the income minus what you paid in germany and here it is HM treasury rule which applies.

 

[jessicatam]

That sounds like a painful amount of tax...are there any countries that would work out better for a UK investor?

 

[investinvalue]

Jessica,

Why is this 25% a PAINFUL amount and let's not forget that is on net ampunt after all the deuctions mentioned above. I end up paying more taxes to HM treasury than to german steueramt.

 

[jessicatam]

Ah, my apologies, I totally mis-read your post. I'll blame it on the heat wave up here in the north east. For some reason I'd read it as getting taxed twice (i.e the UK doesn't care that you already paid some tax abroad, and you were taxed on the whole amount again.).