From my little bit of research it is because the German tax code has since 2008 implemented a European directive that states that income from fixed property (amongst some other things like ship and aircraft rental) should be taxed only in the country that the property is physically located in.
Nach deutschem Einkommensteuerrecht unterliegen dem Progressionsvorbehalt gemäß § 32b EStG u.a. folgende steuerfreien Einkünfte/Einnahmen:
Einkünfte, die nach einem Abkommen zur Vermeidung der Doppelbesteuerung oder einem sonstigen zwischenstaatlichen Übereinkommen steuerfrei sind, für die jedoch in diesem Abkommen der Progressionsvorbehalt in Deutschland vorgesehen ist. Dies gilt ab 2008 nur noch im Bezug zu Drittstaaten. Innerhalb der EU/EWR werden sowohl positive als auch negative Progressionsvorbehalte nicht mehr angesetzt, wenn sie sich aus Einkünften aus Land- und Forstwirtschaft, Gewerbebetrieb, Vermietung und Verpachtung oder der Schiffsüberlassung ergeben. § 32b Abs. 1 Satz 2 Nr. 1 bis Nr. 5 Einkommensteuergesetz (EStG) ist zu beachten.
I have heard that the German tax office often requests a copy of the deeds/contract of sale to establish date of purchase because until 10 years have elapsed from the time of purchase, property sold by a German tax resident is taxable for CGT in Germany if a CG is made. Apart from that, they have no further interest in the property.That is very interesting, a recent newspaper report over here suggested that the Irish could have up to 100000 properties overseas, I would like to know the answer to the question you pose but reckon Revenue point will be that they want to know if the oversea's property was purchased with undeclared income, hard to see them give this one up but hopefully somebody on AAM will have some knowledge to assist.,
More info here
You generally declare the income in a German pay and file and then the tax office informs you that they do not want to hear about it again. Some folks (as far as I can gather from the net) have been asked to prove date of purchase of foreign property, just in case they sell up and are liable to CGT, which Germany still levies.P.S. From your posts it seems the German taxman still asks whether one owns property abroad, but if in the EU need not give rental details. Is that right?
Source: http://www.steuer-spar-berater.de/?cID=S-266190Liegt für die in § 2 a Abs. 1 Nr. 1-6 EStG genannten ausländischen negativen Einkünfte das Besteuerungsrecht infolge eines Doppelbesteuerungsabkommens dagegen nur beim ausländischen Quellenstaat (Freistellungsmethode), hat die deutsche Finanzverwaltung früher die Einbeziehung in den inländischen negativen Progressionsvorbehalt untersagt. Doch damit kam sie bei den Gerichten nicht durch, die darin bei innerhalb der EU bzw. des EWR erzielten Verlusten einen Verstoß gegen Gemeinschaftsrecht sahen (in Bezug auf Verluste aus Vermietung und Verpachtung: EuGH, Urteil vom 21.2.2006, C - 152/03, DStR 2006 S. 392).
Der deutsche Gesetzgeber hat darauf reagiert und den Progressionsvorbehalt für Einkünfte aus Vermietung und Verpachtung sowie aus Betriebsstätten, die in einem Land der EU oder des EWR erzielt werden, ganz abgeschafft (§ 32b Abs. 1 Satz 2 und 3 EStG). Damit gehen weder die Verluste in den negativen noch die Gewinne in den positiven Progressionsvorbehalt ein und sind daher in der deutschen Steuererklärung nicht mehr anzugeben. Diese Neuregelung gilt seit 2008 (§ 52 Abs. 43a Satz 2 EStG).
Somit gilt: Haben Sie in einem EU-/EWR-Staat mit einem entsprechenden DBA (z.B. Österreich) eine vermietete Ferienwohnung, geben Sie in Ihrer deutschen Steuererklärung weder die positiven noch die negativen Vermietungseinkünfte an.
Stammen die Verluste aus Drittstaaten außerhalb der EU bzw. des EWR, mindern bei der Freistellungsmethode die Verluste den Steuersatz auf Ihre inländischen Einkünfte nicht. Denn für diese Verluste gibt es keinen negativen Progressionsvorbehalt. Eine Angabe in der Steuererklärung ist somit nicht möglich. Dagegen unterliegen Gewinne dem positiven Progressionsvorbehalt und erhöhen die Steuerbelastung auf Ihre übrigen Einkünfte. Die Gewinne sind daher in der Anlage AUS anzugeben.
If the right to tax foreign income named in § 2 a Abs. 1 Nr. 1-6 EStG (Income tax taw) lies only in the foreign source country according to a tax treaty, the German tax authorities earlier prohibited the inclusion of losses from this income in the German tax returns for the purposes of reducing one's German tax liabilities. But the courts wouldn't allow this, because preventing such losses (from EU/EEA states) being included was seen as contrary to (European) Community law (European Court, judgement from 21.2.2006, C - 152/03, DStR 2006 S. 392). The German lawmakers reacted by abolishing the inclusion of foreign rental income on German tax returns from inside the EU/EEA completely. With that, neither profirs nor losses (from foreign EU/EEA property) were to be included on German tax returns. this new rule is in effect since 2008.
The status quo: If you have a rented out holiday home in in EU/EEA state you neither include profits nor losses in your German tax return. If the losses arise from property OUTSIDE the EU/EEA, then these losses cannot be used to reduce your domestic tax liablity. It is not possible to enter such losses on the tax return forms. In contrast, profits from properties located outside the EU/EEA must be included and will be used to increase your remaining German income tax rate if appropriate. The profits should be included in anex AUS (of your tax return form).
(sounds identical to the French/German treaty (though this one from the revenue tax treaties website says it is not yet in effect, though signed in 2011).Article 6
INCOME FROM IMMOVABLE PROPERTY
1.
Income derived by a resident of a Contracting State from immovable property
(including income from agriculture or forestry) situated in the other Contracting State
may be taxed in that other State.
I dug a little deeper and found the judgement from the European Court Judgement that led to the changes in german law:
http://curia.europa.eu/juris/liste.jsf?
.
I think you're probably right tbh, but remember the judgement was made in (EDIT) 2006 and it was 2008 before the German Tax authorities made the connection between the Ritter-Coulais case and realised they shouldn't be disallowing the rental losses on EU lettings for the purposes of reducing ones tax rate in Germany. Germany has a load of well paid tax professionals also looking for loopholes but apparently didn't find this one for quite some time.So there is no inconsistency in treatment, and no need for anyone to be rushing off to consult Senior Counsel - you can be quite sure the people who get paid the big bucks to find the loopholes have already seen this judgement and satisfied themselves about its impact on the Irish tax code...
"89. The German tax legislation therefore does indeed have the effect of excluding non-residents from the benefit of a tax advantage, which constitutes a difference in treatment detrimental to non-residents."
Thanks for taking the time to go through it MB. I hadn't read all of the opinion and perghaps some of this is over my head, but humour me ;-)
Wrt this bit:
Person A lives in Ireland and has no other income except for rental income derived in Ireland. They get the single person tax credit (plus any others they qualify for).
Person B lives in another EU state and has no other income except for rental income derived in Ireland. They get no reliefs or tax credits and thus pay more tax than the Irish resident.
Does that not also have the effect of excluding non-residents from the benefit of a tax advantage, which constitutes a difference in treatment detrimental to non-residents?
Is this also in keeping with the judgement?
lol. Come on MB, I'm not the only one who has shown interest in this ;-)Dog with a bone... I Knew I should've went with one more paragraph!:
What does that mean in layman's terms?if the situations of residents and non-residents are, as a rule, objectively different
lol. Come on MB, I'm not the only one who has shown interest in this ;-)
What does that mean in layman's terms?
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