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Indebted Berlin hikes tax on property sales

This week brought bad news for anyone thinking of buying a flat in Berlin, as city authorities announced they would raise tax on property sales from early next year.

Indebted Berlin hikes tax on property sales
Photo: DPA

Berlin’s Senate passed legislation on Tuesday hiking up sales tax for those buying property in the city, newspaper the Tagesspiegel reported. From January 2014, buyers will have to pay a six percent tax on the sales price, up from the current rate of five percent.

And at the rate property is still changing hands, the Senate estimates next year’s tax hike could bring in an extra €100 million a year for the hopelessly-indebted city.

Despite a recent modest upturn in the city’s fortunes, “poor but sexy” Berlin remains a whopping €63 billion in debt – a figure that when calculated per head, (€22,000) works out as higher than the bankrupt US city of Detroit (€20,000 per head).

Ever-popular with foreigners looking to snap up the city’s last remaining bargains, Berlin’s housing market is still booming nearly a decade after the first rumours began circulating about what was then some of Europe’s cheapest property deals.

Meanwhile, average prices continue to rise each year and now stand at €1,954 per square metre, up from €1,757 in 2012, according to the Berliner Morgenpost newspaper.

This means a 60-metre-square, two-bedroom flat would cost an average of €117,240 today, up from €105,420 last year.

With sales still on the increase – last year 53 percent more flats were taken out of the rental market to be sold than the year before – the increase in property sales tax is seen by the city as the best way to bring in some desperately-needed income, wrote the paper.

The city’s income from property sales tax has more than doubled in the last four years, from €300 million in 2009 to an estimated €680 million in 2013.

READ MORE: Merkel’s East Berlin flat – rent for €55 a night

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PROPERTY

Why Germany is mulling an extension to property tax deadline

Federal Finance Minister Christian Lindner (FDP) is seeking talks with state leaders to arrange a possible extension to the deadline for submitting the new property tax declaration. Here's what's going on.

Why Germany is mulling an extension to property tax deadline

Under plans to reform how property tax is calculated, around 36 million homeowners in Germany have been asked to fill in a tax declaration this year. 

The deadline for submitting the new declaration is currently set to expire at the end of October. But according to Finance Minister Lindner, just a quarter to a third of property owners have completed their tax return so far. 

Speaking on the RTL/ntv programme Frühstart, the FDP politician said he would arrange talks with the state premiers this week in order to pitch a deadline extension of at least a few months. 

“My offer: we extend the deadline for submitting the property tax return by a manageable period of time,” he said.

Lindner said it was important to be “realistic” about the fact that some citizens, especially older property owners and pensioners, felt overwhelmed with the tax return. 

He also acknowledged that there had been problems with the software for submitting tax returns, which had added to homeowners’ woes. 

Reform has faced numerous hurdles

The new system will primarily calculate the tax rate using land value and rent, though states will be able to introduce other regulations.

Advocates of the change say the new system is fairer than the current one that bases the tax rate on the (often outdated) value of the property. 

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However, attempts to carry out the largest tax reform since the Second World War have hit numerous hurdles along the way, with property owners complaining of difficulties filling in and submitting the declaration.

There were also issues affecting the government’s Elster tax portal, which was overloaded with users in July after the tax offices started accepting property tax declarations. 

The problems have led to growing calls to extend the deadline until at least January 31st, 2023. 

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