Recently, a new special depreciation rule was created in Germany pursuant to § 7b EStG (German Income Tax Act) for the purchase and production of new rental apartments. In addition to the annual straight-line depreciation of 2% per annum, the special depreciation amounts to up to 5% per annum over a total period of 4 years. The special depreciation favours new housing developments, which were produced on the basis of a construction application submitted after 31 August 2018 and before 1 January 2022.
IMPORTANT: New living space must indeed be created. Art. 181 (9) of the Valuation Act defines the living space (at least 23 square meters). Extensive modernizations or refurbishments are out of the question for this special depreciation.
The newly created apartment can be located in a mixed-use building. In such cases, the acquisition or production costs for the entire building must be split. Art. 255 HGB (German Commercial Code) defines the acquisition and production costs.
In order to be able to claim the special depreciation, the construction costs may not exceed EUR 3,000.00 per square meter. However, the special depreciation is limited to construction costs up to 2,000.00 EUR per square meter. These include subsequent acquisition or production costs, which are incurred in the 3 years after purchase or manufacturing of the apartment.
The apartment must be used for at least 10 years for renting purposes. In the case of an apartment sale within this ten-year period, the apartment purchaser must be contractually obliged to rent out the apartment for the remainder of the period, otherwise the apartment seller will be deprived of the special depreciation.
The special depreciation can be obtained by private individuals as well as companies. However, companies can only benefit from them if they have received - if any - de minimis subsidies over a period of 3 assessment periods totalling a maximum of EUR 200,000.00. The claimant must prove this. In Germany, the assessment periods are usually the same as the calendar years.