Buying property in Germany - Transferring money from US

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Hi everyone, I'm interested in starting the process to purchase an apartment in Berlin in the coming months and have a few questions. 

 

As part of the down payment for the mortgage, my parents have offered to transfer me some money to help. With this in mind, what would be the best way to go about this to eliminate any additional taxes that may have to be paid? Specifically from transferring money from the US to Germany. 

 

I'm assuming that I would have to have the cash in my account when applying for any mortgage to receive a pre-approval from the bank. 

 

I hope to hear some comments from expats who have gone through this situation in recent years. Thank you!

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What taxes are you talking about? There is no tax just for transferring funds. Gift tax is another matter but for gifts of parents to children €400 k/10 years are free. However, you need to inform the Bundesbank of incoming transfers of more than € 10 k (or is it 12 k, don't remember) for statistical purposes if you're a resident.

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Not sure, I thought there would be taxes when transferring large sums of money from the US to Germany. Or from person 1's US bank account to person 2's German bank account. 

 

I found this useful thread here - https://www.toytowngermany.com/forum/topic/357859-transferring-large-sum-of-money-from-us/

 

The question that was not answered in the above thread is would it better for my parents to transfer the money to my US bank account first -> and then I transfer it to my German bank account. Or I directly have my parents transfer it to my German bank account? 

 

 

 

 

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There is zero German tax for funds moving from your US account to your DE account.

 

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Thank you. 

 

What would be the most hassle free way to do this. 

 

Have my parents transfer the sum of money to my US bank account so I can transfer it from my US bank account to my German bank account (both my US and German bank account under the same name)

 

Or have my parents directly transfer me the sum of money from their US bank account to my German bank account

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Get your parents to transfer it to your US account (wait a few days) then transfer it to your DE account.

 

I've never had any problems moving money from my UK account to my DE account. Same name/person etc.

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You might also want to think about how to max out on the exchange rate as banks are often very expensive for foreign exchange transactions.  Some people use Wise and other similar companies and I have (in the UK) a bank account that offers Mastercard daily rates and 0.4% fee.  This is about the same as Wise at the end of the day, within a few cents or pence on fairly large amounts.  And both are up to maybe 2% better than household name banks!  On, say, 100k, that's perhaps 2k! Not sure if there are such banks in the US, where you or your parents could open an account and use it for this purpose? 

 

Are there gift/inheritance tax issues for your parents to consider in the US?  There would be in the UK! 

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7 hours ago, GaryC said:

You might also want to think about how to max out on the exchange rate as banks are often very expensive for foreign exchange transactions. 

Worth asking your bank whether they charge fees for the conversion. My banks don´t - they apply the exchange rate determined by the respective "Landesbank" of their Bundesland.

 

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Say at bank A 1USD buys you 0,84eur, and there is zero fees, whereas at bank B 1USD buys you 0,85eur but it has XYZ fee per conversion. Which is most convenient?

Fazit: forget fees, look at the whole math instead.

 

I used TorFX and XE in the past, all good. The conversion rates there change every seconds (maybe even faster, not sure), so bear in mind when making comparison.

 

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16 hours ago, Chelski said:

Get your parents to transfer it to your US account (wait a few days) then transfer it to your DE account.

 

I've never had any problems moving money from my UK account to my DE account. Same name/person etc.

 

There would be no tax implications of sending over 100k EUR from my account in the US to my DE account?

My understanding is that there is a 400k EUR threshold for gift tax so if my parents were to send it from their US account to my DE account then there would be no issues with tax. 

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No expert here. 

This is what I think:

 

In neither case of sending the 100k into your DE account would result in paying a gift tax, because of the 400k threshold.

However, if this 100k comes to DE from the US account of your parents, it will count into the 400k, the 400k being a lifetime total (maybe a 10yr or 20yr total, whatever...)

So from the German Finanzamt point of view at least, although both ways are good and result in no tax at first, moving the cash in the US from parents to you, and from your US account to your DE account next, is probably better.

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I want to reiterate the point above about using a transfer service (I've used currencyfair.com in the past, as it was easier to connect my DE bank account than XE.com). Even if your bank allegedly charges little or no fees for transfers, they often bake in a bad exchange rate and skim money off the top in that manner. The operative term here is 'bank exchange rate'— this is the rate that banks trade between each other— you want something as close as possible to this rate. Transfer services give rates that are very close to the bank rate. 

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11 minutes ago, m0ckduck said:

I want to reiterate the point above about using a transfer service (I've used currencyfair.com in the past, as it was easier to connect my DE bank account than XE.com). Even if your bank allegedly charges little or no fees for transfers, they often bake in a bad exchange rate and skim money off the top in that manner. The operative term here is 'bank exchange rate'— this is the rate that banks trade between each other— you want something as close as possible to this rate. Transfer services give rates that are very close to the bank rate. 

I agree.  You need to look at the whole package, which is why I mentioned the bank I use offers Mastercard rates, which are about the best you can achieve as a retail customer as far as I can ascertain, and then charges a fee of 0.4%.  Transparent and easy to use as a comparator. 

 

To give an idea of the potential cost of not doing your homework, back in the 1980s I was moving about £10k back to the UK.  I was initially going to us the bank my parents banked at but my father suggested I call one or other bank too (no internet etc in those days of course).  I made 4 calls to the then high-street names.  One would not give a rate at all saying only, "Give us the money and we'll tell you the best rate in a few days" - WHAT???  The difference between the best and worst of the rest was a whopping 7%.  So, £9,300 in my pocket compared to £10,000.  I think you can guess which one I went for!  But imagine if that had been £100k, not £10k?  The difference would have been £7,000!!!

 

 

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28 minutes ago, GaryC said:

One would not give a rate at all saying only, "Give us the money and we'll tell you the best rate in a few days" - WHAT???

Reminds me of when we got our driveway built.

One of the company insisted in me wasting many hours with them, they wanted to personally take me to a few of the work they did around town, to discuss details bla bla, all this before they quoted. "how can we possibly quote before you select the stones?" and "how can you possibly select the stones unless you see them for real?"

When I pressed further them they answered "us producing a quote is real work, so to get a quote from us you must first pay us".

Believe it or not this company is very successful in our area.

 

I understand making it difficult for the customers to have information is a tactic employed by many, and I think sadly it often works.

 

 

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On 10/27/2021, 2:58:32, Gambatte said:

No expert here. 

This is what I think:

 

In neither case of sending the 100k into your DE account would result in paying a gift tax, because of the 400k threshold.

However, if this 100k comes to DE from the US account of your parents, it will count into the 400k, the 400k being a lifetime total (maybe a 10yr or 20yr total, whatever...)

So from the German Finanzamt point of view at least, although both ways are good and result in no tax at first, moving the cash in the US from parents to you, and from your US account to your DE account next, is probably better.

 

Yes but would it count as a gift if I transfer the sum of money from my US bank account to my DE bank account? 

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The 400k tax free gift is over a 10 year period.  If you want to play it by the book, you should tell Finanzamt about the gift.  It could save you trouble later if anybody asks where you got the money.

 

Another question is if you or your parents have to pay gift tax in the US or whether a dual tax agreement between the US and Germany mentions gifts in any way.

 

 

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1 hour ago, endsee said:

Yes but would it count as a gift if I transfer the sum of money from my US bank account to my DE bank account? 

 

If you did this, could the FA here perhaps be interested in where the money came from?  Perhaps you have considrable investments in the US earning interst you have not declared here?

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I stand to be corrected but in the UK at least, a gift is a gift, is a gift.  It matters not whether it is routed from the giver in country 1 to your account in country 1 and then from your account in country 1 to your account in country 2, or whether it comes straight from the giver's account in country 1 to your account in country 2.  Whatever are the tax consequences for the giver in country 1 need to be ascertained and whatever at the tax consequences for the recipient in country 2 also need to to be established.  I cannot imagine that the German FA would view it any differently. 

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39 minutes ago, GaryC said:

I stand to be corrected but in the UK at least, a gift is a gift, is a gift.  It matters not whether it is routed from the giver in country 1 to your account in country 1 and then from your account in country 1 to your account in country 2, or whether it comes straight from the giver's account in country 1 to your account in country 2.  Whatever are the tax consequences for the giver in country 1 need to be ascertained and whatever at the tax consequences for the recipient in country 2 also need to to be established.  I cannot imagine that the German FA would view it any differently. 

 

It doesn't.

No matter how many accounts he drags this money through, it won't change the fact that it is a gift from his parents and therefore subject to German gift tax by virtue of the fact that he, as the recipient of the gift, is resident in Germany.

For what exactly "subject to gift tax" means, please read here.

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@PandaMunichJust out of curiosity: Would you be able to claim the €400 k threshold twice if you receive the first €400001 from your dad and another €400001 from your mother?

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