GERMANY Law and Practice Contributed by: Wolfram H. Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
• the company is resident in Germany; or • more than 50% of the value of the shares in such company is based directly or indirectly on German real estate. However, if the shares are held by a corporation, the German participation exemption regime pro - viding for an effective tax exemption of 100% or Buildings are subject to depreciation at an annu - al rate of usually 2% or 3% on the acquisition costs. However, the Growth Opportunities Act ( Wachstumschancengesetz ) will provide for a degressive depreciation of 5% for the first six years after acquisition/construction of residential buildings whose construction commenced/com - mences between 1 October 2023 and 30 Sep - tember 2029. Land and shares are not depre - ciable. Taxable rental income will be reduced by the costs incurred for rendering the lease (eg, interest and maintenance). 95% might apply. 8.5 Tax Benefits
If an investor maintains a permanent establish - ment in Germany, profits from the sale of real estate allocable to this permanent establish - ment can be offset by accounting for a reserve that reduces taxable income, subject to specific conditions. This reserve will reduce the acquisi - tion costs of real estate that are acquired in later years. Thus, the built-in gains of the sold real estate are not realised upon the sale of such real estate; hence, the tax on such built-in gains may economically be suspended by transferring the built-in gains to newly acquired real estate. Tax benefits have recently been introduced regarding photovoltaic facilities. VAT-zero-rat - ing applies to the supply of small photovoltaic facilities for residential buildings. Income from the operation of small photovoltaic facilities will be exempt from income tax.
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