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Purchase Process in Germany

Below is the standard purchase process in Germany and issues that may affect that purchase:

• The ownership right, under German Civil Law, is defined as the right to possess, use and dispose of land in the most absolute fashion as long as no prohibited use is made thereof (absolute ownership).
• The purchase of property is determined by the finalisation of a sales agreement, which should include an exact description and all encumbrances of and relating to the property.
• Legal ownership of a property cannot be transferred until registration of transfer of legal title has been entered to the land register (Grundbuch). Prior to the registration of transfer of title, a clearance certificate (Unbedenklichkeitsbescheinigung) must be issued by the tax authorities to confirm payment of real estate transfer tax.
• Transfer of legal title, tax clearance certificate and all additional agreements legally relating to the purchase of the property must be notarized. The notary fees are based upon the purchase price.
• Approval at the city or municipal administration is required when purchasing a property in new federal states. If the real estate is administered under trust or by the state and the consent of the owner is not given, approval by the administration may be denied. The vendor's position as legal owner must be approved which may require further clarification from the land register as well as precise contractual preparations.

Costs of a standard property purchase in Germany include the following:

• Capital gains from the sale of property are classified as ordinary business income, trading in real estate or non-recurring gains are generally subject to the standard tax rates, charged at the corporate income tax rate of 25%.
• Capital gains from the disposal of property within 10 years of the date of acquisition are normally classified as income from capital gains, which are no longer applicable after this time.
• As part of the planned taxation reforms for 2008, corporate income tax is to be reduced to 15%. An additional solidarity surcharge of 5.5% is levied on assessed income or corporate income tax, to finance unification costs, raising the total payable to 26.375%.
• Income earned from property letting is deemed as "rental income". Because the letting activities of resident companies generate business income, all rental income is applicable for corporate income tax of 25%.
• Real estate transfer tax (RETT) is a uniform statutory rate of 3.5% although the state of Berlin applies 4.5%. RETT is an important factor for direct property acquisitions, share deals and corporate re-organisations and restructurings.
• Annual land tax presently varies between 0.1% and 0.6% of the fair market value (not unitary value).

The Obelisk Advantage:

As Obelisk approaches its projects purely from an investment perspective, its priority is to deliver each real estate product with an emphasis on simplicity and transparency throughout the purchase process. Therefore, Obelisk has already identified the purchase procedure for its clients as a simple, four step process:

1. The client chooses and reserves the unit that best suits their investment requirements, and Obelisk takes the client through a compliance procedure.
2. An independent lawyer, sourced and appointed for the client by Obelisk, will have already carried out full due diligence on the real estate product. They will issue all purchase contracts and paperwork to the client.
3. On receipt of this contract, the client will sign and make the first payment. The lawyer will notify the client of all further payments when required.
4. The appointed lawyer will also represent the client in all aspects legally required within the country of purchase, ensuring that clients of Obelisk enjoy the benefits of simple and hassle-free real estate investment.