Anyone planning to buy property abroad – as a holiday home, a retirement residence, or as part of a permanent emigration – will sooner or later ask what German real property transfer tax applies to the purchase. The answer surprises many people: none. German real property transfer tax (Grunderwerbsteuer) under the German Real Property Transfer Tax Act (Grunderwerbsteuergesetz, GrEStG) applies exclusively to land located in Germany. Anyone buying in Spain, Portugal, Austria, or elsewhere pays no German real property transfer tax – but does pay the relevant local taxes and fees instead, which often differ substantially in structure and amount from the German system. This article sets out what applies instead when buying property abroad, which German reporting obligations may become relevant in certain scenarios, and what to look out for regarding notary costs and financing.
Why German real property transfer tax plays no role when buying abroad
Real property transfer tax is a transaction tax tied to a clearly defined territorial connecting factor. Section 1(1) GrEStG makes this explicit: the transactions it lists – such as the purchase contract or the conveyance (Auflassung) – are subject to the tax only “insofar as they relate to domestic land”. What counts as land within the meaning of the Act is defined by Section 2 GrEStG by reference to the civil-law concept of land, with certain exceptions such as fixtures used for business operations or mineral extraction rights. Both provisions share one thing in common: they presuppose that the land is located in Germany.
For the purchase of a flat in Alicante, a house on the Algarve, or a condominium in Vienna, this means: the German GrEStG simply does not apply, because the property lies outside its territorial scope. This does not create a “tax loophole” – the purchase is not thereby tax-free, but instead falls entirely under the tax and fee law of the country where the property is located. This clarification matters because, in practice, a mistaken assumption sometimes circulates that the level of German real property transfer tax (between 3.5 and 6.5 percent depending on the federal state) can be used as a rough guide to the expected charge abroad. That is regularly misleading, as the following examples show.
What applies instead: comparable levies abroad
Every country regulates the taxation of property acquisition independently – often not even uniformly at national level, but regionally or locally. The following three examples are among the classic destinations for German emigrants and second-home buyers, and show how differently these systems can be structured. They do not replace a case-by-case review on the ground – the actual amount depends on the federal state, region, municipality, purchase price, and whether the property is new-build or existing, and changes repeatedly through legislative reform.
Spain levies the so-called Impuesto sobre Transmisiones Patrimoniales (ITP – property transfer tax) on the purchase of an existing (not newly built) residential property. It is set by the autonomous regions and varies accordingly considerably – rates broadly range between 6 and 13 percent of the purchase price, depending on the region and purchase price. For the purchase of a newly built property, VAT (IVA) plus a stamp duty (AJD) applies instead of the ITP. The specific region is therefore decisive for the calculation.
Portugal levies the Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT – municipal property transfer tax). For buyers of residential property who are not tax-resident in Portugal, a uniform rate of 7.5 percent of the purchase price has applied since Decree-Law No. 97/2026 of 20 May 2026 (in force since 25 May 2026, part of the “Construir Portugal” reform package), while tax-resident buyers continue to benefit from staggered, progressive rates with allowances. The reform provides for two ways of reclaiming the surcharge over the standard progressive rate: if the buyer becomes tax-resident in Portugal within two years of the purchase, the difference can be refunded. Alternatively, it is sufficient to let the property – with the tenancy agreement concluded no later than six months after the purchase – for at least 36 months within the first five years, at a rent of up to EUR 2,300 per month. Important in practice: the refund application itself must also be filed with the Portuguese tax authority within six months of the relevant condition being met – that is, from the date tax residence is established, or from the date the letting requirement is fulfilled; missing this deadline forfeits the right to a refund. As this reform is still relatively recent in its effects, it is worth obtaining an up-to-date local review before any purchase.
Austria levies a flat real property transfer tax (Grunderwerbsteuer) of 3.5 percent of the purchase price (with special rules for transfers within the family), plus a land register registration fee (Grundbucheintragungsgebühr) of 1.1 percent; where the purchase is financed by a loan, a further charge (Pfandrechtseintragungsgebühr) for registering a mortgage in the land register may apply.
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| Country | Levy | Order of magnitude (rough guide) |
|---|---|---|
| Germany | Real property transfer tax (GrEStG) | 3.5–6.5% depending on federal state – does not apply to property abroad |
| Spain | ITP (existing) or IVA + AJD (new-build) | approx. 6–13%, varies by region |
| Portugal | IMT | 7.5% flat rate for non-residents (since May 2026); progressive for residents |
| Austria | Real property transfer tax + land register registration fee | 3.5% + 1.1% |
This table is for rough guidance only. It does not replace up-to-date, locally obtained advice – tax rates, allowances, and assessment bases are regularly adjusted in all the countries mentioned, and regional variations can be significant.
Notary and legal costs: a different structure than in Germany
Anyone used to the German system, in which the notary is a neutral party remunerated under a statutory fee scale (the Court and Notary Costs Act, Gerichts- und Notarkostengesetz, GNotKG) and handles the entire purchase transaction, should not simply transpose that expectation abroad. In Germany, notary and land registry costs together typically amount to around 1.5 to 2 percent of the purchase price, set uniformly by law and independent of which notary is instructed.
In Spain, a statutory fee scale for notaries likewise exists, and the pure notary costs, typically well under one percent of the purchase price, tend to be lower than in Germany. However, the Spanish notary does not examine the transaction in the same depth as a German notary and, in particular, does not provide the buyer with comprehensive legal advice. It is therefore common in Spain to additionally instruct one’s own lawyer (abogado), who reviews the property legally and represents the buyer in the process – at separate, individually negotiated cost. A gestor, an administrative service provider handling dealings with authorities and tax formalities, is also frequently involved. In total, the overall purchase-related costs – tax, notary, land registry, lawyer, gestor – can reach a double-digit percentage of the purchase price in Spain.
In Austria, the system is structurally more similar to the German one: the purchase contract is usually drawn up by a notary or lawyer, whose drafting fees are roughly in the range of one to three percent of the purchase price plus VAT, in addition to the real property transfer tax and land register registration fee mentioned above.
The practical consequence: anyone who applies the German logic of “one notary, one fee scale, done” to a purchase abroad regularly underestimates the total cost. Before any purchase, a complete, locally obtained breakdown of all incidental costs should be obtained – not just the tax, but also notary, legal, and any brokerage costs.
German reporting obligations when acquiring foreign assets: Section 138 AO
A common misunderstanding concerns the reporting obligations under Section 138(2) of the German Fiscal Code (Abgabenordnung, AO). This provision requires taxpayers resident in Germany to notify the competent tax office of certain foreign transactions – including the founding or acquisition of businesses and permanent establishments abroad, the acquisition, relinquishment, or change of a shareholding in a foreign partnership, and the acquisition or disposal of shareholdings in foreign corporations once a holding of at least 10 percent of the capital or assets is reached, or once the total acquisition cost of all shareholdings exceeds EUR 150,000. The notification must be filed together with the tax return, at the latest within 14 months of the end of the relevant tax period.
Important in practice: Section 138(2) AO does not mention the private acquisition of a property abroad by a natural person. Anyone who, as a private individual, buys a holiday flat in Spain or a house in Portugal directly – that is, without interposing a company – does not, by that acquisition itself, generally trigger a reporting obligation under Section 138(2) AO; other reportable or declarable situations, for example involving interposed corporate structures, are unaffected by this and must be assessed separately. The position is different where the property is held not directly in one’s own name, but through a foreign company or partnership – for example, a property-holding company incorporated abroad. In that case, the acquisition of the interests in that company can itself fall within the thresholds mentioned above and thus become reportable, even where the underlying economic purpose is “merely” the purchase of a single property. Whether a holding structure via a foreign company is even advisable in the individual case – for example, for liability, inheritance, or tax reasons – and what reporting and disclosure obligations it triggers in Germany, should be examined before the company is formed, not afterwards.
Independently of Section 138 AO, it should be borne in mind that a property located abroad, where unlimited tax liability in Germany continues – for example, where the property is let – generally has to be included in the German tax return, usually taking into account the applicable double taxation agreement. This, however, is an ongoing declaration obligation, not a one-off notification requirement under Section 138 AO.
Financing questions for property abroad
Financing, too, differs noticeably abroad from the familiar German process. Mortgage security abroad – for example, by registering a charge (Grundschuld) directly on the foreign property – is generally not possible via a German bank, since German credit institutions do not have security registered in foreign land registries. Anyone wishing to finance a property abroad through a German bank must therefore generally fall back on a property located in Germany as security, or provide other assets as collateral.
Alternatively, financing through a local bank in the target country is an option, with the foreign property itself serving as security. Local terms and requirements then apply – for example, as to the equity share, which is often higher for foreign buyers than for domestic ones, and possibly an interest premium compared with domestic financing. Where the purchase is outside the eurozone, there is the additional risk of currency fluctuation if the loan and the property value are denominated in different currencies. Which route – a German bank with domestic security, local financing in the target country, or a combination of the two – is sensible in the individual case depends on the individual asset structure, the target country, and the planned use of the property.
Illustrative example
The following example is entirely fictitious and serves illustrative purposes only; it does not describe any real case or real person.
A couple plans to buy a condominium on Spain’s Costa Blanca after retirement, at a purchase price of EUR 300,000. In their first calculation, both assume a charge “as in Germany” and budget around EUR 6,000 for notary and land registry costs plus around EUR 15,000 in real property transfer tax – together just over 7 percent of the purchase price, based on a mid-range German federal-state transfer tax rate. On checking locally, it emerges that an ITP of around 10 percent applies in the region concerned, plus notary, land registry, legal, and gestor costs. The actual incidental costs are therefore noticeably higher than originally assumed. This fictitious example illustrates why an early, locally obtained cost breakdown is so important before deciding to buy: relying on German benchmarks regularly leads to underbudgeting for a property abroad.
When is legal advice worthwhile?
A legal and tax review before the purchase is particularly worthwhile in the following situations:
- Before signing a preliminary contract or reservation agreement. In many countries, even early contractual documents are already legally binding and tied to deposit obligations.
- When deciding between a private acquisition and an acquisition structure via a company. This decision affects not only local taxes, but also German reporting and declaration obligations such as Section 138(2) AO, as well as liability and succession issues.
- Where unlimited tax liability continues in Germany while the foreign property is let. Here the question arises of how the double taxation agreement with the target country treats the income.
- When choosing the financing route. Whether a German bank with domestic security or local financing is more sensible depends on the individual asset structure and should be clarified before making a binding purchase decision.
Conclusion
German real property transfer tax plays no role whatsoever when buying a property abroad – the GrEStG applies exclusively to domestic land. What takes its place, however, is not tax exemption, but the relevant local tax and fee law, which often differs substantially in structure and amount from the German system, as the examples of Spain, Portugal, and Austria show. Notary and legal costs abroad frequently follow a different logic than in Germany, too. German reporting obligations such as Section 138(2) AO generally do not apply to a purely private property purchase, but can become relevant once a foreign company is interposed. Anyone who clarifies these points before the purchase, rather than afterwards, avoids unpleasant surprises regarding the actual total cost.
The Fiala law firm has published extensively on international tax and asset law and supports clients in preparing a property purchase abroad correctly from both a tax and legal perspective – from classifying local incidental purchase costs to reviewing German reporting and declaration obligations. Anyone planning a property purchase abroad should clarify these questions early, ideally before signing any preliminary contract.
