Germany's strict new rental law bans cash payments starting 2026
A new provision in Germany's Customs Code will soon change how rent must be paid. From 2026, all rental payments, including news from businesses and professionals, will need to go through a bank accountâno cash or informal transfers allowed. The rule affects landlords, tenants, and businesses alike, with financial consequences for those who don't comply.
Under the old system, landlords could deduct rental expenses from their taxable income if payments were made in any form. Now, only bank-transferred rent will qualify for deductions. Owners failing to use the banking system will face taxation on 100% of the rent instead of 95%, with rates between 15% and 45% applied to the difference. This shift increases their tax burden significantly.
Tenants paying rent in cash or other non-electronic methods will lose access to state benefits. Housing allowances and rent refundsâsuch as the one set for Novemberâwill no longer be available to them. The rule covers all types of properties, including main homes, secondary residences, and commercial spaces.
Before 2026, Germany's rental market operated with more flexibility. Landlords could set new rents up to 10% above local averages in high-demand areas, while inflation-linked increases were capped at 3.5% in tense markets. Commercial leases often had three-year terms, with frequent renegotiations. Compared to neighbours like Austria, where short-term lease terminations without cause are now banned, Germany's rules were less strict. However, the country already prohibited fixed-term residential leases without justification, unlike Austria's recent ban on subletting profits.
The change means higher costs for landlords who avoid bank transfers and fewer benefits for tenants paying rent informally. Businesses and professionals will also face stricter rules, as non-bank rent payments can no longer be claimed as deductible expenses. The new system aims to push all rental transactions into the formal banking sector.
