Taxation of income from a German property rental

I spend approximately two months a year in Germany (having lived previously in Frankfurt) and am now taxed in England. As I don't spend a significant amount of time in Germany I want to rent out my flat. Does anybody know what the tax implication of this is? My understanding is that any money made from rental income isn't liable for taxation as the first Euro 7,650 of income if free of tax in Germany. This in conjunction with dual taxation laws means I can bring the money back into the UK. Is this correct?

Thanks.

Rental income is a little different from regular income. It is ALWAYS taxed directly in the country that the property resides (first bite anyway as we will see!!!).

So the rental income is taxable in Germany. As you are no longer resident or earning in Germany then the rental income is your ONLY income in Germany. If it is below the €7,650 limit (or whatever the German tax free limit is) then sure you pay no tax on it in Germany.

However - back to the UK - you then have additional "unearned income" which is taxable as usual. So the income from the rental will be just like additional salary and therefore taxable at your regular highest rate in the UK.

So in a nutshell the Germans get "first crack" at taxing it - then if they don't the UK gets the "second crack". Under the rules of course you never get taxed twice. So if there is some tax payable in Germany, then this is taken into account when you pay the larger amount in the UK.

Is there a tax free limit for a non-resident?

I know in many countries there is not - precisely for the reason stated above...

Yes there is still a tax-free limit for a non-resident.

But you still end up paying the tax due in your resident country.

So if for arguments sake you live in the UK, and own a property in Germany that you rent for €10,000 then the Germans get "first crack". So if the tax free limit is €7,650 (or whatever) in Germany then the Germans will tax you on the €2,350 - which will be bugger all of course.

But the UK authorities will tax you on the full €10,000 (less whatever buttons you already paid Angela).

JE you really should set yourself up as a tax advisor. Just to let everyone know that if you are moving large sums of money into your UK bank account HMRC will be informed. I have just had them onto me twice in the last two months looking explanations for sizeable deposits and trying to hit me with capital gains.

They obviously have your card marked topcat1 as a dodgy fellah. I have never come across this. I guess it depends on what you call sizeable perhaps.

I am told that they are now checking up on non residents since the custom element came under their remit. So they came at me from three angles, firstly when I left my employment in the UK last year and secondly I lent my brother money to buy a house which he has since repaid and finally having sold interests in two companies which I must legitimately pay capital gains.

Dodgy, i dont even know what the word means...

We're in the same boat, only we went south rather than north. Our place is rented out so at some point I have to deal with it. When we first moved here we rented our place in Canada and our dad (acting as our agent) had to deal with withholding taxes. In Canada taxes on non residents is flat 15% on dividends and 25% on everything else (excluding capital gains which are taxed when you move and then no more after that). So we had to file a bunch of paper work to prevent my Dad from having to withhold 25% of the gross rent. It ended up being a zero sum gain in the end.

I'll be talking to our steuerbreater shortly and will be discussing it with him. My assumption is that as non residents there is a flat tax on all income.

As a German resident you are taxed on ALL your worldwide income, no ifs, no buts.

It's worth getting an advisor as there are loads of landlord's expenses that are tax deductible and you will only get taxed on the net income.