Property Transfer Tax
The Most Important Tax When Buying a Property
When you buy a property, it’s not just about the purchase price. Additional purchase costs also play a major role—and one of the biggest among them is the property transfer tax (Grunderwerbsteuer). That’s why it’s crucial to keep it in mind.
But don’t worry—we’ve taken a deep dive into the topic and explain what the property transfer tax is, who has to pay it, what determines the rate, and in which cases it might not apply.
This will definitely help you find the right property in the right location for your first real estate investment. Bonus: There’s also a podcast episode on this topic. Otherwise, enjoy reading below! 👇
What Is the Property Transfer Tax?
The property transfer tax in Germany is classified as a transaction tax—a type of tax applied to legal and commercial transactions. In contrast, ownership taxes are tied to things like income or wealth.
As a transaction tax, the property transfer tax specifically applies to the purchase or exchange of real estate or land. However, it’s calculated only on the price of immovable assets such as land and buildings. Movable assets, like furniture not permanently attached to the property, are not included in this tax.
Property Transfer Tax vs. Property Tax: What’s the Difference?
First-time buyers often confuse property transfer tax (Grunderwerbsteuer) with property tax (Grundsteuer)—and understandably so, as they sound very similar. Both are important for property owners, but they cover two completely different things:
Property transfer tax is paid when you buy a property.
Property tax is paid on ownership, typically on an annual basis.
Another key difference: the payment frequency. Property transfer tax is a one-time payment, while property tax is recurring.
Who Pays the Property Transfer Tax?
Once the seller and buyer have found each other and signed a purchase agreement, it must be notarized. The agreement will specify who is responsible for paying the property transfer tax.
Legally, both the buyer and seller are jointly liable for the tax. However, in practice, it’s almost always the buyer who pays it.
When Is the Property Transfer Tax Due?
The timing of the tax payment is closely tied to the purchase contract. After the contract is signed and notarized, the notary submits it to the relevant tax office.
The tax office will then send you, the buyer, an official assessment notice (Grunderwerbsteuerbescheid). From that point, you typically have one month to pay. Although the law allows the tax office to grant a longer payment period, this is not common practice—so assume that you’ll need to pay within a month of receiving the notice.
Only after you’ve paid will you receive the certificate of clearance (Unbedenklichkeitsbescheinigung).
What Is a Certificate of Clearance?
This certificate is issued by the tax office once the property transfer tax has been paid. It might seem like a formality—but it’s crucial.
Without it, nothing moves forward. The certificate is a prerequisite for registering the new owner in the land register.
Who Do I Pay the Property Transfer Tax To?
This is where the property transfer tax differs from most other transaction taxes in Germany, which usually go to the federal government. Property transfer tax, however, is paid to the federal state (Bundesland).
Your place of residence doesn’t matter—what counts is the location of the property you’re buying. The state may then pass part of the revenue on to the local municipality.
How Is the Property Transfer Tax Calculated?
The tax is based on the purchase price of the property or land, which serves as the assessment basis.
If you, as the buyer, take on any existing obligations or liabilities from the seller, this can affect the total value used for calculation. The resulting total—purchase price plus any assumed obligations—is your final tax base.
The property transfer tax amount you pay depends on this base and the specific tax rate set by the state.
How Much Real Estate Transfer Tax Will I Have to Pay?
That largely depends on the federal state in which you're buying a property or plot of land. Since September 2006, the real estate transfer tax rate in Germany is no longer set at the national level.
In practice, this means: the rate in North Rhine-Westphalia (NRW) is different from that in Bavaria, Hesse, or Lower Saxony. Each state sets its own real estate transfer tax rate. So, the amount you’ll pay in taxes when purchasing a property depends entirely on where you’re buying.
Here’s an overview of the current tax rates across all federal states:
Federal State | Tax Rate (2025) |
|---|---|
Bavaria | 3,5 % |
Berlin | 6,0 % |
Brandenburg | 6,5 % |
Bremen | 5,0 % |
Hamburg | 5,5 % |
Hesse | 6,0 % |
Mecklenburg-Vorpommern | 6,0 % |
Lower Saxony | 5,0 % |
North Rhine-Westphalia | 6,5 % |
Rhineland-Palatinate | 5,0 % |
Saarland | 6,5 % |
Saxony | 5,5 % |
Saxony-Anhalt | 5,0 % |
Schleswig-Holstein | 6,5 % |
Thuringia | 6,5 % |
An Example of How Real Estate Transfer Tax Is Calculated
Let’s say you're buying a property in Hamburg in 2025 for €250,000, and you arrange a land charge (Grundschuld) of €100,000. That brings your total tax base to €350,000.
Next, you look at the current real estate transfer tax rate in Hamburg. In 2025, the rate is 5.5%. That means 5.5% of €350,000 equals €19,250. So, in this example, you would pay €19,250 in real estate transfer tax.
By the way, we didn’t choose Hamburg randomly—Hamburg is one of the two federal states that increased its transfer tax rate. Before the adjustment, the rate was 4.5%. That would have resulted in a tax amount of €15,750 instead of €19,250. So the timing of your purchase can make a noticeable difference.
Exempt from Real Estate Transfer Tax? Yes, It’s Possible
You can only avoid paying real estate transfer tax in a few exceptional cases. For example, private individuals are not required to pay the tax when acquiring a property through inheritance. The same applies to property acquisitions made as gifts. However, caution is advised: in these cases, other taxes may apply under inheritance and gift tax laws.
Real estate transactions between immediate family members are also exempt from the tax. This includes spouses, registered civil partners, and parents. So, if you purchase a property from your parents, for instance, you won’t need to pay real estate transfer tax.
There is also a minimum purchase threshold to consider. If the purchase price is below €2,500, no real estate transfer tax is due.
Can I Deduct Real Estate Transfer Tax from My Taxes?
Unfortunately, if you're purchasing a property for private use, you cannot deduct the real estate transfer tax from your taxes.
That said, there are ways to minimize the amount of transfer tax you pay when buying property. One common approach is to sign separate contracts for the purchase of the land and the construction of the building. In this case, the real estate transfer tax only applies to the land purchase — not the building cost.
What Does This Mean for Your Real Estate Investment?
Since the real estate transfer tax is part of the incidental purchase costs, it directly affects your total investment. As you've seen, the tax rate increased in two federal states in 2023—and many others have raised their rates in recent years as well.
This isn’t necessarily a reason to panic, but it does highlight one thing clearly: the best time to enter the property market is as early as possible. And if you purchase a property through Urbyo, you don’t need to worry. Our calculators show you right away whether your real estate investment makes financial sense—including the transfer tax. Got questions? Our experts are here to guide you every step of the way.