How Are Returns On GermanReal.Estate Taxed?
Key Takeaways
- Taxation of blockchain-based investments can be confusing and is changing every so often with different regulations
- Taxation of “security” tokens is easy: A flat 25% tax rate for all capital gains the investor makes on a personal level
- Starting in 2023, investors can secure up to 1.000€/year in tax benefits when investing in real estate security tokens
Taxation Of Blockchain Investments In General
When making any investment decision, the taxation of potential profits should never ever be the major deciding factor to or against any investment. Taxation is definitely one factor of many to consider, but it should not be the one and only factor. Find out in this FAQ article how real estate security tokens are taxed and how they are treated differently than cryptocurrencies or NFTs.
The financial regulators at the Federal Financial Supervisory Authority (BaFin) and the tax regulators at Finanzamt have been trying to figure out blockchain-based investments and their taxation rules for many years now. The result is that tokens are taxed differently than any other blockchain-based investment. (Real estate) security tokens are even taxed differently than currency tokens or utility tokens, which is highly beneficial for investors.
Different profits of blockchain-based investments:
- Capital gains: When buying any blockchain-based investment (other than security tokens) at 100€ and selling it at 200€, the 100€ capital gains are generally speaking subject to personal income tax of up to 45% (as well as solidarity tax & church tax). When holding a blockchain-based investment over the long term (+1 year), your tax rate might be 0% under certain conditions (if profit is below 600€/year).
- Passive income: Depending on the type of passive income from cryptocurrency or NFT (e.g. liquidity mining, rewards, etc), the taxation can be different. Most earnings from decentralized finance (DeFi) will be taxed with the investors’ personal income tax rate of up to 45% in Germany.
As cryptocurrencies and NFTs are considered “other assets” and not financial products or financial securities (like security tokens), selling them is considered a “private sale” by Finanzamt. When making too many of these private sale transactions (Finanzamt has no specific number here), any private person can be considered as a business engaging in a commercial activity. As a business, all your earnings from the first cent onwards will be taxed with a roughly 30% tax rate (not 15% like for SPVs).
Taxation Of "Security" Tokens
While the taxation of blockchain-based investments can get confusing very quickly (depending on the type of profit), taxation of security tokens is as easy as possible. Profits above the tax-free threshold are taxed with the flat 25% capital gains tax rate (just like with REITs or ETFs). No matter if these profits come from the difference of buying vs. selling price (from rising real estate value), passive rental income, profit share, or interest rate.
Security tokens are taxed differently because they are the only blockchain-based investment that is considered a financial security by BaFin and Finanzamt. Financial securities are transferable to other investors (like on our secondary market that is expected to go online in 2024) and give investors certain rights that are similar to other securities. Details can be found in §2 of the German Electronic Securities Act (eWpG).
Thanks to that classification as financial security, profits from (real estate) security tokens are taxed at 25% only. That makes taxation of rental income also more attractive than rental income that would be taxed with up to 45% on a personal income level. Rental income is taxed like regular income from work in Germany. Rental income from security tokens is taxed at 25% only (That’s why security tokens are better than REITs).
Secure completely tax-free investment returns of up to 1.000€/year by investing in our real estate security tokens. Yes, tax-free income in Germany does exist!
Tax Benefits Of Investing In Real Estate Security Tokens
As real estate security tokens are considered financial securities (unlike real estate crowdfunding), they come with another inherent benefit for investors: The 25% capital gains tax rate applies for profits above 801€/year only (starting in 2023 this threshold will be increased to 1.000€/year). Profits below 801€ (1.000€) are completely free of any tax thanks to the “Sparer-Pauschbetrag”.
When investing in our real estate security tokens, the first 801€/year (1.000€/year) in profits will not be subject to any kind of tax for everyone with a German tax ID. For married couples that file a joint German tax declaration, the amount is doubled to 1.602€/year (2.000€/year starting in 2023).
Utilize this rare opportunity to make tax-free profits in Germany by registering as an investor here.
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