For many foreigners living in Germany, buying a house or apartment means transferring a substantial amount of money from abroad to Germany. This may be personal savings accumulated before moving to Germany, proceeds from assets sold abroad, or financial support from parents or other family members.

From a German tax perspective, however, there is a very important difference:

Are you transferring your own money – or are you receiving somebody else’s money?

Your Own Money Is Not a Gift

Suppose you have €300,000 in a bank account in your home country and transfer the money to your own German bank account in order to purchase an apartment in Berlin.

This transfer is not a gift. You already owned the money before the transfer. Moving your own assets from one country or bank account to another does not, by itself, create German gift tax.

German gift tax generally requires that one person transfers something to another person without adequate consideration and thereby enriches that person.

However, with large international transfers, your German bank may ask questions about the source of the funds. German anti-money-laundering rules require banks to monitor transactions on a risk-sensitive basis and, where necessary, obtain information about the origin of assets.

Therefore, anyone planning to transfer substantial personal savings to Germany should retain documents such as foreign bank statements, savings records, contracts for the sale of property or investments, or other evidence showing where the money came from.

Money from Your Parents Is Different

The situation changes completely if the €300,000 does not belong to you but is transferred by your parents.

Assume that you are a foreign national living in Germany and your parents remain in your home country. They transfer €300,000 to your German bank account so that you can buy an apartment.

This can constitute a gift for German tax purposes.

One of the most important points for foreigners is that German citizenship is not required. Under German gift tax law, unlimited German tax liability can already arise if either the donor or the recipient has a residence or habitual abode in Germany.

In other words:

A foreign national living in Germany can potentially become subject to German gift tax on money received from parents abroad, even if the parents, the bank account and the money itself are all outside Germany.

But a Gift Does Not Automatically Mean Tax

German law provides substantial personal allowances.

A child can currently receive up to €400,000 from one parent within a ten-year period before German gift tax generally becomes payable. A spouse or registered life partner has an allowance of €500,000. For many other family members, however, the allowance is considerably lower; siblings, for example, generally fall under the €20,000 allowance.

Gifts received from the same donor within ten years are aggregated for gift tax purposes.

This distinction can become particularly important when parents help finance a property purchase.

For example, if a mother gives her daughter €300,000 and the daughter has received no previous gifts from her mother during the relevant ten-year period, the amount may fall entirely within the €400,000 allowance.

If both parents provide funds, each parent is generally a separate donor. It is therefore important to establish who actually owns and transfers the money rather than simply sending the entire amount from one convenient family bank account.

What About a Family Loan?

Sometimes parents do not want to make a gift but instead lend money to their child for the property purchase.

A genuine loan is fundamentally different from an outright gift. However, the agreement should clearly document the amount, repayment obligation and other relevant conditions. Interest-free or unusually favourable loans, and loans that are later waived, can raise separate gift-tax questions.

Simply describing a transfer as a “loan” is therefore not enough if, in reality, repayment is never intended.

The same applies if the parents transfer the purchase price directly to the seller or notary account instead of first transferring it to their child. The fact that the money does not pass through the child’s bank account does not automatically prevent the transaction from being treated as a gift if the parents are effectively financing the child’s property purchase.

Before Transferring a Large Amount to Germany

Foreign residents planning to finance German real estate with money from abroad should clarify four questions before the transfer:

Whose money is it? Your own savings, or money belonging to another person?
If another person provides the money, is it a gift or a genuine loan?
What is the relationship between donor and recipient, and what German gift-tax allowance applies?
Can the origin and ownership of the funds be documented for the German bank and, where necessary, the tax authorities?

A gift that falls within a personal allowance may result in no actual gift tax, but this should not be confused with the question of whether the gift must be reported. German law generally provides for notification of acquisitions subject to gift tax within three months, subject to certain exceptions, for example for qualifying notarised gifts.

The Key Message for Foreigners in Germany

When purchasing property in Germany with money from abroad, the decisive issue is not simply how much money arrives in Germany.

The decisive question is:

Did you already own the money – or did somebody else give it to you?

Transferring €500,000 from your own foreign savings account can be completely different from receiving €500,000 from your parents, siblings or another family member.

For foreigners living in Germany, clarifying this distinction before the money is transferred can prevent unexpected tax problems and make it considerably easier to document the financing of a German property purchase.