UK rental income on German tax returns (post-Brexit)

172 posts in this topic

15 minutes ago, Auntie Helen said:

... it's all giving me good copy for my blog though, "The travails of filling in a German Tax Return after Brexit."

I am agog to read it, now I can look forward to both cake photos and taxes ;)

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14 hours ago, Auntie Helen said:

That means this rental income of 13.600 has increased my tax burden by 1.420 EUR. That's about 10% of the rental profit, although I am theoretically not being taxed on it!

 

What infuriates me is not having to pay the tax itself. But the fact that (almost) everybody keep pretending "they are not taxing it".

If I buy A in the shop, I pay X

But if I pay A and B, do I still pay X? If yes, then B is free. But If I pay more than X, I'm irritated by those that keep telling me "yes of course, B is free, it just makes A more expensive":wacko:

I don't want it free, but I also don't like perverse wording only aimed at making things appear what they are not. It just feels wrong and offensive.

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Just to add:

I wonder how many Brit expat here, with UK rental income, that voted for Brexit...

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1 hour ago, Gambatte said:

Just to add:

I wonder how many Brit expat here, with UK rental income, that voted for Brexit...

I would hazard a guess that not many voted for Brexit. 
 

I rang the Hessen Finanzamt in December and was told that because the double taxation agreement, UK rental is exempt from DE tax and progression. I wish that were true!

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Just now, emkay said:

I rang the Hessen Finanzamt in December and was told that because the double taxation agreement, UK rental is exempt from DE tax and progression.

 

Wow.:huh::unsure:

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Nice to see that front line staff in Germany tell you as much sxxx as their counterparts do in the UK!

 

 

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2 minutes ago, GaryC said:

Nice to see that front line staff in Germany tell you as much sxxx as their counterparts do in the UK!

 

 

At least the HMRC staff that I’ve spoken to have always been polite and friendly! The FA woman practically called me an idiot for posing the question at all!

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I would agree with you there.  HMRC has put an enormous amount of work into its frontline approach/attitudes over the past decade plus.

 

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Well I had my reply from the Bundesbank about the exchange rate in 1938:

 

mit Bezug auf Ihre E-Mail teilen wir Ihnen mit, dass die amtlichen Devisenkurse der Berliner Börse für das Pfund Sterling am 19. Oktober 1938 1 Pfund Sterling = 11,895/11,925/11,910 Reichsmark (Geld-/Brief-/Mittelkurs für telegrafische Auszahlung) lauteten.

Einen Devisenkurs zwischen Reichsmark und Euro gibt es nicht. Sollten Sie jedoch an einem aktuellen Vergleichswert für einen historischen Geldbetrag interessiert sein, finden Sie Rechenergebnisse zur heutigen Kaufkraft von historischen Beträgen in deutschen Währungen (Kaufkraftäquivalente) auf unserer Internetseite. Da Kaufkraftberechnungen mit Unsicherheiten verbunden sind, bitten wir Sie, die Ausführungen zur Methodik und zu den Einschränkungen von Kaufkraftvergleichen zu beachten.

Link zur Internetseite "Kaufkraftvergleiche historischer Geldbeträge":
https://www.bundesbank.de/de/statistiken/konjunktur-und-preise/erzeuger-und-verbraucherpreise/kaufkraftvergleiche-historischer-geldbetraege-775308

Link zur Tabelle mit Kaufkraftäquivalenten:
https://www.bundesbank.de/resource/blob/615162/a52b231886b66bdaaf90f26fa12cb335/mL/kaufkraftaequivalente-historischer-betraege-in-deutschen-waehrungen-data.pdf

Links zu Rechenbeispielen:
https://www.bundesbank.de/resource/blob/615172/42eacbf5ca666a2d595d9dbfce3ca369/mL/kaufkraftberechnung-beispiel-2003-in-euro-data.pdf
https://www.bundesbank.de/resource/blob/615186/02e81cc77047c3ab0e568861ed207637/mL/kaufkraftberechnung-beispiel-1990-in-dm-data.pdf

Sollten Sie weitere Fragen haben, kontaktieren Sie uns gern.

 

So as there was no specific Reichsmark to Euro rate I used the rate Panda showed earlier in this thread which was 1 Reichsmark = 4,30 EUR.

 

I have this huge Word Document I am writing alongside doing the Steuererklärung with all the explanations as to how I get to these figures. I even have a PDF of the conveyancing document from 1938 as it shows the total cost of house and land was 541 GBP but value of the land was 25 GBP, so that works out at 4.62% of the total price, not that standard 20%. Seeing as I have an official document (nearly 80 years old!) to show this I have put that distribution of value in my tax return to see what the local Finanzamt think.

 

My experience of the local Finanzamt is that they are generally helpful. I don't think there are that many Brits in Kempen who have rental income so it might be a bit new to them too.

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32 minutes ago, Auntie Helen said:

Well I had my reply from the Bundesbank about the exchange rate in 1938:

 

mit Bezug auf Ihre E-Mail teilen wir Ihnen mit, dass die amtlichen Devisenkurse der Berliner Börse für das Pfund Sterling am 19. Oktober 1938 1 Pfund Sterling = 11,895/11,925/11,910 Reichsmark (Geld-/Brief-/Mittelkurs für telegrafische Auszahlung) lauteten.
...

I even have a PDF of the conveyancing document from 1938 as it shows the total cost of house and land was 541 GBP but value of the land was 25 GBP, so that works out at 4.62% of the total price, not that standard 20%. Seeing as I have an official document (nearly 80 years old!) to show this I have put that distribution of value in my tax return to see what the local Finanzamt think.

 

Use the average exchange rate of 11.91 RM/GBP [= (Geldkurs + Briefkurs)/2 = (11.895 + 11.925)/2], since that's the Devisenkassamittelkurs (see §256a HGB and here)

  • (541 GBP total price - 25 GBP land price) * 11.91 RM/GBP * 4.3 €/RM = 26,425.91€
    2% AfA (Absetzung für Abnutzung) per year: 2% * 26,425.91€ = 528.52€
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Having written to my local Finanzamt with the request for the exchange rate (the same email I sent to the Bundesbank, who answered) I got a written reply today.

 

"aus Ihrer Email ist nicht ersichtlich um welche Einkünfte es sich genau handeln soll. Vermütlich geht es um eine Immobilie, die Sie in Großbritannien geerbt haben. Hierbei sind ausschließlich die im Veranlagungsjahr angefallenen Einnahmen bzw. Werbungskosten anzusetzen.

 

Möglich wäre auch noch eine Abschreibung ab Anschaffung. Diese Abschreibung kann aber nur für einen entgeltlichen Teil berücksichtigt werden und dann ab dem Zeitpunkt der Anschaffung.

 

Auch die Möglichkeitm die Afa des Rechtsvorgängers zu übernehmen besteht. Da Sie jedoch ausführen, dass das Objekt bereits seit 1938 im Besitz der Familie ist, wird die Abschreibung bereits ausgelaufen sein. Auch in diesem Fall sind keine weiteren Ermittlungen notwendig."

 

She thinks that I have inherited the property rather than having it as a gift when my grandmother still lived, but suggests from this that as it is a family item I cannot use the depreciation. Is that actually the case?

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3 hours ago, Auntie Helen said:

She thinks that I have inherited the property rather than having it as a gift when my grandmother still lived, but suggests from this that as it is a family item I cannot use the depreciation. Is that actually the case?

Under German law, inheriting or being gifted are the same thing: you also "get" the purchase date of the person who left/gave it to you.

Sorry, but I have lost track of your houses, the 1938 house we were talking about is actually the 1939 one your grandmother had bought back then?

So not a house built in 1938 that she had bought, for example in 1975?

If yes, the Finanzamt is right, since the depreciation period starts with the last sale.

 

See: https://www.toytowngermany.com/forum/topic/386460-uk-rental-income-on-german-tax-returns-post-brexit/?do=findComment&comment=3912059

On 22/01/2022, 19:23:20, PandaMunich said:

If you were gifted the property, the depreciation starts on the date it was purchased by the person who gifted it to you.

So if your granny had gifted you in 1987 a house built after 1924, which she had bought in 1975, then the house would be "depreciable" until 2025, i.e. you would use as an expense each year until 2025 (assuming 20% of the purchase price were for the land):

  • 2% * 80% * granny's_purchase_price_from_1975

If granny's house had been built before 1925, the depreciation period would only be 40 years, i.e. 2.5% per year, and the depreciation period would have already ended in 2015.

 

Granny's purchase price in GBP would have to be converted into DM using the exchange rate valid on her 1975 purchase date and the DM amount then converted into € using the exchange rate 1€ = 1.95583 DM.

 

For the old GBP to DM (Deutsche Mark) exchange rates, put the GPB file "Devisenkurse der Frankfurter Börse / 1 GBP = ... DEM / Vereinigtes Königreich" from here: https://www.bundesbank.de/dynamic/action/de/statistiken/zeitreihen-datenbanken/zeitreihen-datenbank/759778/759778?listId=www_s331_b01011_3

into the cart by clicking on the cart symbol at the right of the table.

Then open the cart: https://www.bundesbank.de/de/statistiken/zeitreihen-datenbanken/datenkorb

and click on the blue button "Zum Download".

--> it will now download a csv-file with all GBP/DM exchange rates back to 1949 to the "Downloads" folder on your computer.

Open the file with Excel and look up the exchange rate on the historic purchase date in 1975.

 

Errmm, didn't you already come to the Finanzamt's conclusion yourself, a few pages back?

On 23/01/2022, 13:32:55, Auntie Helen said:

House Number 1, Granny's house, cost 431 pounds in 1939 when she bought it, so that's long past the point of depreciation.

 

House Number 2 that my parents gave me in 2008 was bought by them in June 1984 for 29.500 GBP. I am having a bit of a struggle with the CSV file above but will work on it tomorrow on my work computer which might behave better.

 

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Yes, I have made the mistake here. The older house was built in 1938 for my grandmother and has been in our family the whole time. So I can't claim for it. That's a bit disappointing.

 

House number 2, which came from my parents, will work for the calculation.

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I’d be very grateful for some clarification on income and payment dates in respect of calculating the correct pound to euro exchange rates.

 

Is it best to use these exchange rates rather than daily rates shown on the ECB website? https://www.bundesfinanzministerium.de/Web/DE/Service/Publikationen/Umsatzsteuer_Umrechnungskurse/umsatzsteuer_umrechnungskurse.html

 

I receive rental income from the managing agent less any maintenance expenditure.  Do I apply the £ to € exchange rate for the day that the payment reaches my UK bank account or, the date of the agent’s invoice? Sometimes these cross over from one month to the next.

 

For annual invoices such as insurance cover and ad hoc invoices, do I use the date that I paid the invoice, the invoice date or the cover start date? Then apportion over 12 months? 
 

I guess the amounts won’t be much different though it would be nice to get my spreadsheet correct to start with.

 

I understood that there’s no minimum expenditure for repairs, maintenance and replacements (ie windows, electrical appliances etc) to be eligible for splitting costs over more than 1 year. Is this a maximum of 5 years? Can each expense be calculated separately ….ie, can I split windows over 5 years, carpets over 2 years etc ie in different fractions? 
 

Are bank charges eligible as an expense to transfer income from the UK to DE. My income is low so every little helps!
 

Many thanks in advance.

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4 hours ago, emkay said:

Is it best to use these exchange rates rather than daily rates shown on the ECB website? https://www.bundesfinanzministerium.de/Web/DE/Service/Publikationen/Umsatzsteuer_Umrechnungskurse/umsatzsteuer_umrechnungskurse.html

These monthly rates on the BMF website are actually just the average monthly ECB rates.

Officially, you are supposed to use the exact daily ECB rate, but because this means a lot of work, the Finanzamt allows you to use the monthly averages instead, and most people do.

 

4 hours ago, emkay said:

I receive rental income from the managing agent less any maintenance expenditure.  Do I apply the £ to € exchange rate for the day that the payment reaches my UK bank account or, the date of the agent’s invoice? Sometimes these cross over from one month to the next.

Officially, you would need to use the exchange rate of the day/month on which the agent received the money from the tenant and the ones of the days on which the agent paid for the maintenance.

But the Finanzamt won't mind if you simply use the exchange rate of the day/month on which the transfer from the managing agent enters your UK bank account for everything.

 

You have to split it up into:

rental income 

- maintenance --> either deduct 100% in 2021 or spread over 2 to 5 years

______________________________________

= what you got from managing agency

 

4 hours ago, emkay said:

For annual invoices such as insurance cover and ad hoc invoices, do I use the date that I paid the invoice, the invoice date or the cover start date? Then apportion over 12 months? 

The exchange rate of the day/month you paid.

 

5 hours ago, emkay said:

I understood that there’s no minimum expenditure for repairs, maintenance and replacements (ie windows, electrical appliances etc) to be eligible for splitting costs over more than 1 year. Is this a maximum of 5 years? Can each expense be calculated separately ….ie, can I split windows over 5 years, carpets over 2 years etc ie in different fractions? 

Yes, the law §82b EStDV states the maximum period of 5 years: https://dejure.org/gesetze/EStDV/82b.html

 

Yes, you can decide for each expense separately whether you want to spread it at all, over 2 years, over 3 years, over 4 years or over 5 years.

Even if this is only about one measure, but you paid for it in different instalments, you get to choose the distribution anew for each instalment, see Randziffer 189 of the commentary on §82b EStDV: https://www.haufe.de/personal/haufe-personal-office-platin/frotschergeurts-estg-21-vermietung-und-verpachtung-5325-groesserer-erhaltungsaufwand-82b-estdv_idesk_PI42323_HI1394508.html

  • Rz. 189
    Wird bei einer einheitlichen Baumaßnahme der Aufwand in verschiedenen Teilbeträgen gezahlt, kann für jeden Teilbetrag ein gesonderter Verteilungszeitraum gebildet werden.
  • margin no. 189
    If, in the case of a uniform construction measure, the expenditure is paid in different instalments, a separate distribution period may be chosen for each instalment.

But please keep "clean" spreadsheets to print out and give to the Finanzamt in case they want to know how exactly you reached these amounts.

 

And please don't start spreading costs under 736.26€ over several years, that may stick in the Finanzamt's craw.

Yes, nowhere in the law is do they specify a limit amount, but they do orient themselves on past court rulings.

Above that amount, the Finanzamt can't complain, since the BFH, which is Germany's highest financial court allowed in its ruling BFH v. 27.10.1992, IX R 66/91, BStBl II 1993, 591 that 1,440 DM (1,440 DM is 736.26€ = 1,440 DM / 1.95583 €/DM) can be spread.

 

5 hours ago, emkay said:

Are bank charges eligible as an expense to transfer income from the UK to DE. My income is low so every little helps!

Yes.

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9 hours ago, emkay said:

@PandaMunich, thank you so much for all your advice. It is very much appreciated.

 

 

@emkay - well said, you speak for the rest of us here too, i might say!   

(I am really pleased you posted your questions on this thread, as i actually had fairly similar questions to you too in fact.)

 

@PandaMunich - once more, thank you so very very much from my side too of course!

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Oh man! I thought I would quickly download Wiso today and fire off my tax return, momentarily forgetting about UK rental income.

 

So thought I would have a quick look on here and see if there are any new posts...3 pages later :wacko:

 

Well I will have a read through today and try and work out what goes where, thanks for the advice given on here.

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OK, after reading and re-reading all the advice on here I think I have cracked it. If I have understood correctly it isn't too dissimilar to the UK return, which would make sense. Apart from the depreciation bit, that is new to me.

 

I will write up what I have done, maybe it will help others in a similar situation whilst also highlighting what a total shambles I have made of the whole thing!!!!

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OK here is what I have done.

 

Situation: house purchased in October 2003 and rented out directly to tenants.

Numbers below have been rounded-up/made simpler for explanation purposes.

 

Income calculation

 

Rent per month = GBP 850

Exchange rate per month * 850 = EU income 

Source - https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Umsatzsteuer/Umsatzsteuer-Umrechnungskurse/2022-02-02-umsatzsteuer-umrechnungskurse-2021.pdf?__blob=publicationFile&v=3

 

Total income = EU 12,000





 

Costs/Outgoings

 

Depreciation:

House bought in October 2003

House price + Lawyer + estate agent = GBP 170,000

GBP/Euro exchange rate in October 2003 = 0,69693

Source - https://www.bundesbank.de/resource/blob/709654/03f03bb0c55a090115a805c564dc49d4/mL/2003-10-exchange-rate-statistics-data.pdf

 

Cost in Euro - GBP 170,000 / 0,69693 = EU 243,926

 

House cost at 80% = EU 243,926 * 0.8 = EU 195,141

Source - https://helfer-in-steuersachen.de/index.php/inhalt/10-tipps-zur-anlage-v-eink%C3%BCnfte-aus-vermietung-und-verpachtung/300-tipp-1172-beim-hauskauf-aerger-mit-dem-boedenwert.html

 

Depreciation at 2% = EU 195,141 * 0,02 = EU 3902.83


 

Expenses:

Per month: (Mortgage interest + repair costs)*Euro exchange rate for that month

Total for year = EU 6,200


 

So:

Income - EU 12,000

Costs - EU 6,200

Depreciation - EU3902.83

 

Total = 12,000 - 6,200 - 3902.83 = EU 1,900 (approximately)

 

This is then the figure I will put into line 36 Anlage AUS

 

So i think that is correct if I have understood all the info here. I will put the calculations into a spreadsheet which I will send a PDF version of to the FA.

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