Tax on rented property if living n German & Wife is German

[beatlebum]

I am hoping somebody out there may be able to advise me on my current situation. Basically myself and my wife have moved out of our property, an apartment in Dublin and rented it out. We have subsequently moved to Berlin and she is registered as living in Germany now. I work between Ireland and Berlin and live between both and pay all my taxes in Ireland as I am not registered in Germany. The question is when we go to pay tax on the property at the end of the year this is where the confusion is. Do I pay the full tax on the rent income (which is 1200 per month) or do I pay 50% of the tax and my wife pays 50% of the tax (as we are joint owners). I was going to pay the full tax myself on the rental income but my wife worried that maybe she has to pay tax on 50% of the income in Germany. We own the property outright so the 1200 per month would be fully taxable. I know it is a slightly complicated question but any help would be much appreiciated. I suppose another point on this question is, would it be beneficial to me tax wise to position myself fully in Germany or does than not make any difference to my current tax situation, at present I pay tax as normal in Ireland on my earning, even though I probably spend more time now in Berlin. Thanks very much.

 

[murphaph]

I work between Ireland and Berlin and live between both and pay all my taxes in Ireland as I am not registered in Germany.

Just as an aside (I also own my own flat in Berlin and will be moving to live in it permanently in March) you will have to register with the Burgeramt in your Bezirk or face a possible fine later on. The maximum period of grace for EU citizens is 2 months. Your wife probably told you but it's a pain if you don't have your Anmeldung when trying to do certain thngs in officialdom (or even hiring a van at some places).

The question is when we go to pay tax on the property at the end of the year this is where the confusion is. Do I pay the full tax on the rent income (which is 1200 per month) or do I pay 50% of the tax and my wife pays 50% of the tax (as we are joint owners). I was going to pay the full tax myself on the rental income but my wife worried that maybe she has to pay tax on 50% of the income in Germany.

The Finanzamt knows nothing about this property and I would keep it that way from your wife's perspective (however you should take advantage of being married-the german tax system favvours married couples over 2 singles). In any case, all rental income is taxable in Ireland first and foremost. Revenue clamped down on that a few years back IIRC. You must declare your full rental income to revenue in Ireland and pay tax due to revenue first. You could not pay tax on half the rental income in Ireland and half in Germany but as Ireland and Germany have double taxation agreements, any tax due to the Finanzamt would have to have the tax paid to revenue deducted first so you wouldn't be paying twice, but as I said, I wouldn't bother telling the Finanzamt about an irish property (from your wife's perspective) unless I had to.

We own the property outright so the 1200 per month would be fully taxable.

Well you'll get no mortgage interest relief but there are other deductibles like wear and tear and any money you put into the place is an expense you can deduct (insurance for example).

I know it is a slightly complicated question but any help would be much appreiciated. I suppose another point on this question is, would it be beneficial to me tax wise to position myself fully in Germany or does than not make any difference to my current tax situation, at present I pay tax as normal in Ireland on my earning, even though I probably spend more time now in Berlin. Thanks very much.

Having said all the above, I really believe you'll need the services of a Steuerberater (tax advisor). You don't want the german taxman being owed a load of money and a half decent Steuerberater will (like an accountant) pay for themselves a few times over in taxes avoided. This is especially true in Germany where the tax system allows lots of unusual deductibles and you sound like you are going to be a freelancer (selbstaendiger I believe they are called in Germany) and freelancers pretty much NEED a Steuerberater to get their tax returns done properly and save paying taxes they don't have to. Best of luck in Berlin!

Edit: Check out [broken link removed] and other sections of their 'finance' forum for more advice on the german tax system. I guarantee you you're not the first to be in this position.

 

[beatlebum]

Hi Murphaph. Thanks for all that info, thats been really helpful especially as regarding myself making full tax payment for the 1200 per month and saying nothing to the Finanzamt here at all. I had kind of thought I would approach it this way but wanted to make sure it would be ok to do so. I guess I should have stated that we got married in Berlin last August so they are aware that we live here. We haven't had any problems doing anything we need to do with her been registered here and because I was doing a week here and a week in Ireland and paying all my tax in Ireland etc. Anyway thanks ever so much for all the info, I must read up more on that Toytown link, I am a member there too. Best of luck with your move to Berlin, its a brilliant city to live in and nodody talks about 'recesssion' 24/7. If you want to hook up for a coffee when you come over, I would be happy to meet up. Cheers again.

 

[murphaph]

No worries BB, just to clarify that I'm not an expert by any stretch and these things are just what I will be doing but your Steuerberater will surely give you solid, moneysaving advice. A coffee sometime sounds great-my username is the same on TT-what's yours?

 

[beatlebum]

Meant to ask as my wife is still not convinced. She still thinks she will have to pay income tax here on 50% of the rental income as we are joint owners just as if it was earnings from a job. At present she has no job here. I told her that if I pay 100% of the tax in Ireland on the rental income then its sorted. Is this the case. Thanks.

 

[beatlebum]

Cheers again, and by the way my username on ToyTown is beatlebum too. We live in the Schoeneberg area of Berlin. I can be contacted here or through ToyTown and can be emailed through ToyTown too. Cheers

 

[murphaph]

Meant to ask as my wife is still not convinced. She still thinks she will have to pay income tax here on 50% of the rental income as we are joint owners just as if it was earnings from a job. At present she has no job here. I told her that if I pay 100% of the tax in Ireland on the rental income then its sorted. Is this the case. Thanks.

I can't answer that and I doubt any accountant from Ireland will be able to answer it definitively either. German tax code is notoriously complex. A Steuerberater will definitely pay for themselves given your circumstances I reckon. The Finanzamt would consider it income if they knew about it but she would be able to deduct at least her share of the tax paid from what she'd owe to the Finanzamt due to our double taxation agreements with Germany.