Buying in Germany If You Might Leave: The Four Rules That Decide

Every German property guide is written for someone who is staying. This one is not.

Quick answer

Possibly, and it flips on one thing: whether you will live in it. If you will, the tax-free window needs far less time than the three years everyone quotes. If you let it out, depreciation becomes a bill the day you sell early.

Why the usual advice does not help you

Almost every German property resource, in any language, is written for a buyer who is staying. The advice it gives is about which city, which rate, which repayment plan. None of that is your question.

Your question is whether a horizon you cannot predict can work at all, and it is decided by four rules in the tax and civil codes. Two of them pull in opposite directions depending on a single fact about you: whether you will live in the flat or let it out. Get that fork right and a five year plan is viable. Get it wrong and you will have paid for a lesson.

One thing to say at the start, because people carry it around as a background fear and it is simply not true: leaving Germany does not trigger a tax event on a flat you own directly. Rule four covers it. Nothing forces you to sell when you move.

Rule one: if you will live in it, the tax-free window is much shorter than three years

A private property sale within ten years of buying is normally taxable. § 23 Abs. 1 Satz 1 Nr. 1 Satz 3 EStG carves out an exception for own residential use, and it offers two alternatives: either the flat was used exclusively for your own living between acquisition and sale, or it was used for your own living in the year of sale and in the two preceding years.

English-language sources almost universally translate the second alternative as "you must live there for three years". That is wrong, and the difference is worth a great deal of money to someone with a short horizon.

The Federal Fiscal Court settled it on 27 June 2017 in IX R 37/16: the use must run across three calendar years without filling them, with the exception of the middle calendar year. Only the middle year has to be complete. The first and the last need only be touched.

So the theoretical floor is roughly one year and two days. Move in on 31 December of year one, live there through all of year two, sell in January of year three, and the exemption applies. That is not a loophole, it is the plain reading the court adopted, and it turns a five year horizon from marginal into comfortable.

Two further points from the same line of cases, both of which correct claims still circulating in English.

Occupancy does not have to be continuous or exclusive in time. The first headnote of IX R 37/16 extends the exemption to a flat you occupy only from time to time, provided it remains available to you as a home in the meantime, and it names second homes, holiday flats not intended for letting, and the double household case. That directly covers someone who keeps a German flat while spending long stretches abroad.
A home office does not spoil it. In IX R 27/19 of 1 March 2021 the court held that the part of the gain attributable to a home study is exempt as well, expressly against the tax administration's own 2000 circular. Any English page telling you the study share is taxable is quoting a position the Federal Fiscal Court has overruled.

And the trap. If you let the flat first and move in later, the first alternative is gone permanently, because it requires exclusive own use across the whole period. Everything then depends on the three calendar year window being clean, which means the letting has to end before the start of the year before the year before the sale. That is a sentence worth reading twice, and it is the most common way people lose this exemption without noticing.

Rule two: if you will let it out, depreciation is a deferral and not a saving

This is the rule with no English page at all, and it is the one that decides most buy-to-let cases on a short horizon.

When you let a flat you deduct depreciation on the building each year, which is real money against real income. What nobody tells the reader is what happens if you sell inside ten years. § 23 Abs. 3 Satz 4 EStG reduces the acquisition cost that goes into the gain calculation by every euro of depreciation you actually deducted.

The consequence is not intuitive, so here it is directly: a flat sold inside ten years for exactly what you paid for it still produces a taxable gain, equal to the total depreciation you claimed.

Our own illustration with the assumptions stated in the left column. The depreciation rate is the statutory linear rate under section 7 paragraph 4 EStG for that construction period. Your building share and rate will differ.
Step	Our worked illustration
A 400,000 euro flat, of which 300,000 is attributed to the building	Only the building is depreciable. Land never is.
Linear depreciation at 2 percent for a building completed between 1925 and 2022	6,000 euro a year
Let for six years, then sold	36,000 euro of depreciation deducted in total
Sold for exactly 400,000 euro, so no economic profit at all	The acquisition cost is reduced by 36,000, so the taxable gain is 36,000 euro

There is a second, quieter cost in the timing. You deducted the 36,000 euro in six annual slices, against whatever income you had in each of those years. You recognise the whole of it in a single assessment year, on top of your salary, at the top of your progression. For a high earner the rate on the way out is usually higher than the rate on the way in.

Only depreciation actually deducted is caught. The statute says soweit sie abgezogen worden sind. A flat let for three of eight years gives back three years' worth, not eight.
Accelerated and special depreciation are caught too, and they are larger. Anyone who used a subsidised regime has a proportionally bigger add-back waiting.
After ten years none of this applies, because there is no taxable private disposal in the first place. The gain calculation never runs. The ten year line is not a rate reduction, it is a binary.

Which is why, for a letting investor, five years is the hardest possible horizon. You are on the wrong side of the ten year line, your purchase costs have not amortised, and the depreciation you have been enjoying arrives as a bill.

Rule three: renovating in the first three years can convert an immediate deduction into a fifty year one

If your plan involves buying something cheap and improving it, read this before you sign anything with a contractor.

§ 6 Abs. 1 Nr. 1a EStG says that repair and modernisation spending carried out within three years of acquisition counts as construction cost, not as deductible maintenance, once it exceeds 15 percent of the acquisition cost of the building, excluding VAT.

Fifteen percent of the building share, not of the purchase price. This is the near-universal error in English sources and it matters enormously, because land is a large part of what you pay for a German city flat. On the illustration above the ceiling is 45,000 euro, not 60,000.
Net of VAT. Gross invoices have to be stripped before the comparison.
Three years to the day, running from the transfer of possession, benefits and burdens rather than from payment. Work commissioned in month 35 counts. Month 37 does not.
Cosmetic work counts. Three Federal Fiscal Court judgments of 14 June 2016 pulled ordinary redecoration, painting, wallpapering and flooring into the same pot as structural work, along with anything needed to make the flat usable at all. The pot fills far faster than buyers expect.
It is a cliff, not a taper. One euro over the threshold reclassifies the entire spend, not the excess.

What is excluded: genuine extensions, which are construction cost on their own footing anyway, and routine maintenance of the kind that recurs every year. Not excluded, and this surprises people: hidden defects discovered after purchase. There is no allowance for not having known.

On a five year horizon the effect is close to a total loss of the benefit. Capitalised spend on a typical older building is released at 2 percent a year over fifty years, so five years releases a tenth of it. The rest sits in the acquisition cost, where at least it raises the basis and reduces any gain under rule two. The planning move is simple and unglamorous: either keep the documented net spend clearly under 15 percent of the building share, or wait until month 37.

Rule four: leaving Germany is a non-event. The sale date is the only event.

This is the fear that makes people either rush a sale or never buy, and it is misplaced.

There is no German exit tax on directly held German real estate. The exit tax provision people have heard of, § 6 AStG, applies to shareholdings in corporations. It has nothing to say about a flat or a house you own in your own name. Moving abroad is not a deemed disposal, does not mark anything to market, and does not unwind your depreciation.

What does continue is straightforward. Germany keeps the right to tax income from German property under limited tax liability, and the ten year clock under § 23 keeps running exactly as it did. A sale from abroad inside ten years is taxable in Germany. A sale after ten years is not.

There is a reverse warning worth stating, because it is the one case where the fear becomes real. Holding the property through a German company creates an exit tax exposure that direct ownership never had, because then you own shares, and shares are exactly what § 6 AStG reaches. If someone has suggested a corporate structure to you and you are internationally mobile, that is a question for a tax adviser before the notary, not after.

So the decision in front of you is not whether you will still be in Germany. It is when you will sell. Those are different questions and only the second one has tax consequences.

The workaround that usually does not work

The obvious idea, once you understand rules one and two, is to buy a tenanted flat at a discount, let it for a while, then move in and use the owner-occupier exemption. It rarely executes, and the reason is in the civil code.

§ 577a BGB blocks a buyer from relying on own use, or on hindrance of economic realisation, as grounds to terminate a tenancy for three years from the sale. State governments may extend that to up to ten years by ordinance in areas where housing supply is considered particularly at risk, and they have: Munich runs a ten year period, and Berlin operates an extended regime that the Federal Court of Justice has upheld.

It blocks only own-use and economic-realisation terminations. Termination for tenant breach is untouched.
It bites only where the flat was converted into a condominium after it was handed over to the current tenant. If the conversion predates the tenancy, the restriction does not apply, which makes the date of the partition deed against the date of handover the first question to ask about any tenanted flat.
It cannot be contracted around. Any agreement to the tenant's disadvantage is void.
When the clock starts is not always the transaction you assume. The Federal Court of Justice revisited this on 6 August 2025 in VIII ZR 161/24, holding that an acquisition by a vehicle which cannot itself claim own use does not start it.

Now put it next to rule one. In a ten year city, the earliest lawful own-use termination lands after the ten year tax period has already expired, at which point the exemption you were chasing is irrelevant because the whole gain is tax free anyway. The plan defeats itself. It works only where the flat was already a condominium before the tenancy, or where the tenant leaves voluntarily, and neither can be relied on at the moment you sign.

If it works and you want a second one

Worth knowing before it happens rather than after, because the threshold is lower than people assume and the consequences are worse.

Selling more than three properties within about five years of acquiring or building them raises a presumption that you are running a property trading business rather than managing private assets. This is not in a statute. It comes from Federal Fiscal Court case law, consolidated in the tax administration's circular of 26 March 2004, and it turns on the overall picture rather than on any single fact.

If it is crossed, three things follow that people do not expect:

Trade tax applies on top of income tax.
The properties become current assets, which means no depreciation at all. The entire tax model the purchase was built on disappears.
§ 23 EStG does not apply, so the ten year exemption is simply unavailable no matter how long you held.

The five year window is indicative rather than a bright line, and it cuts both ways: the court has found commercial activity on fewer objects where other signs were strong, and in March 2025 confirmed that sales after year five can still escape reclassification where the facts negate an intention to sell at the time of purchase. For an internationally mobile professional the realistic risk is not deliberate trading, it is accidental accumulation: one flat here, another after a relocation, something inherited, and then a tidy-up sale of all of them inside five years.

Putting the four rules together

The fork is whether you will live in it, and the two paths barely resemble each other.

If you will live in it, a five year plan is genuinely viable. The tax-free window needs a little over a year of the right kind, a home office does not spoil it, occupancy does not have to be continuous, and leaving Germany later does not force a sale. What is left to worry about is not tax at all. It is the transaction cost: roughly 5.5 to 8.5 percent of the price on the way in, which over five years costs you more than the difference between the best and worst city in Germany.

If you will let it out, five years is the hardest horizon there is. You are on the wrong side of the ten year line, so the gain is taxable and your depreciation comes back into it. The purchase costs have not amortised. And if you improved the flat early you probably capitalised the spend for decades rather than deducting it. A letting case wants ten years and a day, or it wants a different plan.

That is the honest summary and it is not what a seller says. For an owner-occupier the five year question is mostly about transaction costs. For an investor it is mostly about the ten year line, and five years is on the wrong side of it.

What we could not verify

Four things we deliberately do not state as settled.

What happens to the owner-occupier exemption if you let a single room to a third party while living in the rest. The statutory logic suggests at least a pro rata problem, but we found no controlling authority and will not guess.
The precise rate at which a gain under § 23 is taxed in your case. It is your personal rate as other income, with the solidarity surcharge and church tax where applicable, and it stacks on your salary. We describe the mechanism rather than print a percentage.
Whether the double tax treaty between Germany and the country you move to assigns the taxing right as we assume. German real estate is normally taxed where it sits, but treaties differ and yours is the one that matters.
The blocking period ordinance currently in force in any specific municipality. These are made by state governments, each runs for at most ten years, and they expire. Check the one that applies to your address rather than a number you read somewhere.

One note on method. The official statute server was unreachable to our tools while this page was written, so the wording quoted above was read on two independent legal mirrors that agreed with each other, and the court decisions were read on the Federal Fiscal Court's own site. The links below point at the official texts.

What would change this answer

Any amendment to § 23 EStG, which is where both the ten year rule and the owner-occupier exemption live.
New Federal Fiscal Court decisions. This area moved in 2016, 2017, 2021 and again in March 2025, and each time an English-language summary somewhere became wrong.
State ordinances on the blocking period after conversion, each capped at ten years and each with an expiry date.

Last reviewed August 24, 2026. We review this page every quarter and whenever a decision on one of the four rules is published. If a euro amount or a holding period decides your case, open the linked statute or judgment rather than relying on this summary.

Frequently asked questions

Do I really need to live in the flat for three years to sell it tax free?

No, and this is the most valuable correction on the page. The exemption needs own use in the year of sale and the two preceding calendar years, and the Federal Fiscal Court held in 2017 that only the middle of those three years has to be complete. The first and last need only be touched, so a little over a year of the right kind can be enough.

Does using a room as a home office spoil the exemption?

No. The Federal Fiscal Court held in March 2021 that the part of the gain attributable to a home study is exempt too, expressly overriding the tax administration's own circular from 2000. English pages still repeating the old position were written from pre-2021 sources and are simply out of date.

I let the flat out first and moved in later. Am I still covered?

The first alternative of the exemption is gone permanently, because it requires exclusive own use across the entire ownership period. Everything then rests on the second alternative, which means the letting must have ended before the start of the second calendar year before the year of sale. It is recoverable, but the timing has to be exact.

Will Germany tax me when I leave the country?

Not on a flat you own directly. The exit tax provision people have heard of applies to shareholdings in corporations, not to immovable property held in your own name. Germany keeps the right to tax the rent and any later sale, and the ten year clock keeps running, but the act of moving triggers nothing at all.

If I sell for exactly what I paid, surely there is no tax?

There can still be, and this catches people. If you let the flat out, section 23 paragraph 3 sentence 4 reduces your acquisition cost by every euro of depreciation you deducted, so a break-even sale inside ten years produces a taxable gain equal to the depreciation claimed. Sell after ten years and none of it applies.

Can I buy a cheap tenanted flat and move in after a couple of years?

Usually not. Section 577a of the civil code blocks a buyer from terminating for own use for three years after the sale, extended to up to ten years by state ordinance in tight markets including Munich. In a ten year city the earliest lawful termination lands after the tax period has already expired, so the plan defeats its own purpose.

Should I buy in Germany if I might leave in five years?