I'm resident in Germany, and thinking of selling my flat in the UK, and I'd like to seek confirmation that I understand the tax position in Germany correctly (or otherwise), with a few extra questions.
I've owned the flat about 6 years, I lived in it for a while, and I use it as a personal base for occasional visits, It has never been rented out, or used by anyone other than myself, family and friends. I expect to make a significant profit on sale.
I think I understand the UK tax position. Under the UK-Germany double tax agreement, the UK has taxation rights, and, as a non-resident in the UK, I must pay UK Capital Gains Tax on the profit, reduced by several deductions. [These deductions are not really relevant to my questions, but if any reader is interested, I can set out my understanding of the UK position.]
I'm aware (from this thread and elsewhere) that the profit from the sale is not directly taxed in Germany, but is included in Progressionsvorbehalt in the year of sale.
Is the amount included in Progressionsvorbehalt the total profit over the full period of ownership (i.e sale price - sale expenses) - (original purchase price - purchase expenses)?
Are there any other deductions allowed, as is the case in the UK?
Are all amounts converted from GBP to EUR as at the dates of payment?
I believe that the Progressionsvorbehalt will increase the rate of tax on both my German income and my (German) wife's income.
As I have very little German income, we can presumably elect to be separately taxed - this would reduce the additional German tax on the property sale to virtually nothing, but for that year we would lose the tax allowances for being married. Is that the way it works?
On the other hand, if we are taxed together, and if my wife has a loss on the sale of an inherited German property in the same year, is there any way that this loss can be offset against my Progressionsvorbehalt income?