Capital Gains Tax on the sale of German Homes

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Hi,

 

I bought a house in Darmstadt 7 years ago for my work when I moved here. I am now about to leave, my work having come to an end, and I need to put my house up for sale so I can buy again in the UK. I have lived in the house with my family for the whole of this 7 years, and have never rented out any part of it.

 

I need to know about the situation concerning Capital Gains Tax on house sales in Germany.

 

I am aware of the rule about no CGT being payable if you own the house for 10 years or more, but are there any exceptions within the 10 years?

 

Several German forum sites say that if you LIVE in the house then no CGT is payable if you sell within 10 years, and it is only payable if you bought it as an investment and have been renting it out. See these sites for what I mean:

 

Link 1

Link 2

Link 3

 

Does anyone know for certain? Anyone here sold since 2009?

 

Any advice gratefully received,

 

Wibs

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I think you will find that you are in the clear since you lived in it at least the past two years. The ten year standard is for rental properties.

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You are correct, there is no capital gains if you sell your main residence. So you don't need to be concerned.

After 10 years you can sell a flat that you have rented out without capital gains too.

But property values in Germany are pretty flat so worrying about tax on any gains may be a moot point anyway.

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If you had the Eigenheimzulage and sell before ten years is up - then you have to pay the Eigenheimzulage back - which may be a source of confusion. Otherwise, you should be fine.

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If you had the Eigenheimzulage and sell before ten years is up - then you have to pay the Eigenheimzulage back

I was under the impression as this situation affects me at the moment, that you no longer receive the yearly credit in future years once the house is sold however I was not aware that previous money had to be repaid can I ask where you got this information from please?.

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Anlage SO is where speculative gains are tax and the notes to that will tell you just what is said above (ie. exemptions of private homes).

 

However, if you are leaving, will German tax practice actually matter? By the time you come to sell, presumably it might be the UK tax regime that you have to report to. It's usually residency that drives tax obligation, not location of asset (being it property, bank account, shareholding etc).

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Many thanks guys for confirming what I suspected. Unfortunately there are pages and pages of hits on Google when you type 'Germany home sale capital gains tax' that only talk of the 10 year rule, and make no distinction about a house for residence, and a house for renting. So much incomplete info out there.

 

Generally in Germany the house market is quite flat, but there ARE local hot spots. In my village outside of Darmstadt they built a new International School (to serve the large expat community working in the space industry in Darmstadt). Each year they open a new grade, which is an intake of 50 new students, and this will go on for the next 6 years. There is now enormous demand for housing in our village, as most families want their kids within walking or cycling distance to school, and there are no housing developments here either, so demand is very high. We are likely to make 150K on the sale of our house.

 

Can someone explain what 'Eigenheimzulage ' is please?

 

Again, thanks for the response

 

Wibs

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Eigenheimzulage is where you purchased a house or flat in the year 2006 or before. Entitlement was based on annual income for the previous 3 years I think.

The average annual family income(previous 3 years income devided by 3) had to below, I can't remember the exact amount but around 40k euro a year plus an attitudinal 30k euro per child. So a family with two children would be about 100k a year.

If you fall below the threshold then you receive annually a tax credit in march every year for 8 years.

We receive 2050 euro per year based on having 1 child. If we had another child during the 8 year period then the annual amount would increase by 800 euro per year for the remaining years from the orignal 8 years. I think the maximum entitlement was for 3 children. Figures above maybe slightly wrong but hopefully you get the idea.

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I was under the impression as this situation affects me at the moment, that you no longer receive the yearly credit in future years once the house is sold however I was not aware that previous money had to be repaid can I ask where you got this information from please?.

 

I remember being told at the time that if I sold before ten years was up - I'd have to pay it all back. I don't know whether I've ever seen it in writing anywhere. Can't find anything at the moment elther and I haven't got time to do a proper search right now.

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According to this thread at 123recht.net (in German), you don't have to repay the Eigenheimzulage if you sell the house/flat. The only effect the sale had was that if you bought a new place, you could only get the new EHZ for the remainder of the original period - e.g. 4 years if you'd already collected it for 4 years.

 

Of course, this no longer matters, as the EHZ has been discontinued.

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NEWS JUST IN!!!

 

Feeling quite confident after the advice here and in the German forums, we contacted the local Finanzampt in Darmstadt to confirm.

 

They told us that PREVIOUSLY you only had to live in the house for 1 year to qualify for no CGT when you sold, but that the rules had now changed in 2009, and that you now have to own it for 10 years to get no CGT (regardless now of whether you live in it or rent it out), with no exceptions.

 

:( :( :(

 

Wibs

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What did they quote you / point you to for that?

 

The same Finanzamt issued me the 2009 instructions for completing Anlage SO (which is where speculative gains are reported). They look the same as ever (they applied when my UK house sale came through). It says this about CGT (I don't usually quote German but it seems easier here for avoidance of doubt: put simply in the bits in bold 0 private homes used for residential purposes are excluded):

 

Von der Besteuerung ausgenommen sind Gebäude, selbständige Gebäudeteile, Eigentumswohnungen oder im Teileigentum stehende

Räume (Wirtschaftsgüter), soweit sie

– im Zeitraum zwischen Anschaffung oder Fertigstellung und Veräußerung

oder

– im Jahr der Veräußerung und in den beiden vorangegangenen Jahren

ausschließlich zu eigenen Wohnzwecken genutzt wurden.

 

I agree the other point about the mini-boom here though. Darmstadt (like a lot of places with work in well-paid fields) is something of a hotspot, particularly family houses and well-located central apartments. Just (short) supply and (affluent) demand. I'm probably 40k up in three years, surprising, for a "prices don't rise" market! Two-tier market more like, it seems to me.

 

Also, I would repeat my point from earlier. Why does the German tax authority matter if you are back in the UK as a resident there?

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The Finanzamt in Darmstadt is in error. If you look in the Income Tax Law (Einkommensteuergesetz):

http://dejure.org/gesetze/EStG/23.html

 

"§ 23

Private Veräußerungsgeschäfte.

(1) Private Veräußerungsgeschäfte (§ 22 Nummer 2) sind

 

1. Veräußerungsgeschäfte bei Grundstücken und Rechten, die den Vorschriften des bürgerlichen Rechts über Grundstücke unterliegen (z. B. Erbbaurecht, Mineralgewinnungsrecht), bei denen der Zeitraum zwischen Anschaffung und Veräußerung nicht mehr als zehn Jahre beträgt. Gebäude und Außenanlagen sind einzubeziehen, soweit sie innerhalb dieses Zeitraums errichtet, ausgebaut oder erweitert werden; dies gilt entsprechend für Gebäudeteile, die selbständige unbewegliche Wirtschaftsgüter sind, sowie für Eigentumswohnungen und im Teileigentum stehende Räume. Ausgenommen sind Wirtschaftsgüter, die im Zeitraum zwischen Anschaffung oder Fertigstellung und Veräußerung ausschließlich zu eigenen Wohnzwecken oder im Jahr der Veräußerung und in den beiden vorangegangenen Jahren zu eigenen Wohnzwecken genutzt wurden; "

 

So you're exempt from capital gains tax.

The rule is - as Swimmer said - if you used the house/flat in the year of sale AND in the 2 previous years as your home, then you're exempt.

 

My advice is to get back to the Finanzamt with the above article of law and ask them for a written statement. You'll see how fast they'll start to back-pedal as soon as you cite EStG §23 Absatz 1.

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Can anyone confirm if the rule about CGT remains that you're exempt if you've lived in the house for 2 years? The last post on this thread was 4 years ago.

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It's unchanged.

 

If you moved in on 31. December 2012 at the latest (so that lived there in 2012, 2013 and 2014) then you won't have to pay any income tax on the profit if you sell in 2014.

 

Or if you only ever lived in that house after you bought it - in that case there's no minimum holding period.

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Thank you, we have had our property since 2009 and will make quite a substantial profit on it. We had checked before we started the selling process, but someone freaked us out last night when they mentioned the 10 year rule!

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Hi

I would like to clarify what does it mean when one says the home owner must live in the residence for two years and the year in which they sell it in order to avoid CGT.

Does this mean calendar years?

Does this mean a therefore a total of 3 years?

Does it have to be consecutive years?

For example if I moved into my property in September 2013 and sold it in October 2014 (therefore 2 calendar years) does this meet the rule? Or does it have to be 3 years to take into account ´the year in which you sell`.

I hope that makes sense.

I am asking as our situation has changed and we are debating selling.

Many thanks

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I have another question I just thought about in relation to my previous post.

 

When you sell and you perhaps have to pay capital gains tax can you first add on all costs associated with buying the property to the purchase price before working out what your CGT is. I bought a new build which had a standard cost and then you could buy extras on top such as another bathrooom and heating in the cellar etc, kitchen. So for example can you add notar costs, land tax as well as the cost of the extras that we had added to the house? In addition we used a Gutachter to oversee the building process. Can that also be added?

If so can you add all those to the original purchase price and then if the price you sell at is higher than all these, this becomes the sum on which capital gains tax is applied?

Much appreciated for any answers.

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If the house was your primary residence then you can sell it whenever you want, there's no minimum holding perid: you could sell it the week after you bought it.

 

If you had rented it out before moving into it yourselves, then you can sell on 1. January 2015 at the earliest.

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