3.11.09 14:21 Age: 311 days

Equal tax treatment of domestic and foreign property in Germany

By: Andreas Fürlinger

The German tax authorities have not accepted financial losses through foreign property before. The European Court of Justice (ECJ) has decided otherwise.

In its decision of the 15th October in 2009 the European Court of Justice (ECJ) ruled that a differential treatment of domestic and foreign real estate in relation to the deduction of depreciation and rental losses in the German income tax is contrary to the European freedom of capital movement. 

"Germans and foreigners living in Germany have been discouraged from investing in property in other EU countries.” This is quite clearly against the law of free movement of capital within the EU.

From now on applies: If the rental income does not cover the cost of property abroad, these costs can reduce the taxable income in Germany.

In other EU countries should apply this principle too. As in the case of Germany, the European directives are not always implemented correctly. Check with your local tax office.