Dear Sceptic
Yes you can set off your interest bill against tax in Germany and the UK. The important thing is that if you borrow the money in the UK (by remortgaging a UK property- which bar the xrate risk could be cheaper than taking out a German mortgage ..... although that's a whole new story) it is VERY important that you get the lender to ringfence the amount you have borrowed with the relevant documenation. This is so that you can prove to the German tax authorities that you have borrowed the money for this purpose.
On the second point there is a double taxation treaty meaning any tax you pay in Germany can be offset against your UK tax bill. Unless you invest in a lot in German property, or don't have interest expenses, you are very unlikely to be paying anything near 40% in Germany in taxation- in fact if you have a couple of small apartments it will be closer to 15% according to our calculations. This is mainly due to your 2% depreciation allowance. So if you are a UK higher rate tax payer it really doesn't make much difference.
If you are looking for opportunities please come and look at our website at www.berlin-capital.com and give me a call any time if you have some questions.
Julian Power
