New Growth Opportunities Act in Germany: Significant impact on the real estate sector

The straight-line depreciation rate for residential buildings completed after December 31, 2022 has already been increased to three percent. In cases where the actual useful life of a building is less than 33 years, the new law now allows depreciation in accordance with this useful life. This regulation will enter into force on January 1, 2023.

Introduction of time-limited declining balance depreciation For new buildings constructed or acquired after January 1, 2006, only straight-line depreciation was previously possible. Due to the urgent housing shortage and high construction costs, a declining balance depreciation of up to 6% is now possible for residential buildings. The regulation will take effect immediately after the promulgation of the law.

Tax-free limit for rental income The law provides for a tax-free limit for income from letting and leasing. Income remains tax-free if it totals less than € 1,000 in the assessment period. The regulation comes into force on January 1, 2024.

Increase in the exemption limit for private property sales The exemption limit for private property sales increases from €600 to €1,000. This amendment applies from the 2024 assessment period and comes into force on January 1, 2024.

Extension of the DAC 6 reporting obligation The law introduces a reporting obligation for certain domestic tax arrangements. This applies in particular to property transactions with a value in excess of € 5,000,000. The regulation becomes effective immediately after promulgation.

Extension of the harmlessness limit for housing cooperatives The corporation tax exemption for housing cooperatives that generate income from renting out their own apartments to members will now be extended to 30% for income from solar power generation. This also applies to trade tax and will take effect after the promulgation of the law.

Taxation of real estate corporations in investment funds Profits from the sale of German real estate in investment funds are subject to taxation. The law creates a regulation to prevent tax avoidance by corporations. The new regulation applies to gains from the sale of shares from the date of announcement.

Real estate transfer tax exemption for partnerships from 2024 From January 1, 2024, partnerships with legal capacity will be regarded as joint ownership for the purposes of real estate transfer tax. The regulation comes into force on January 1, 2024.