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Capital gains tax on property sale after 10 years

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Hi

Does anyone know if I would have to pay capital gains on my UK house sale when resident in Germany?

I have owned my house for 10+ years, however, I have rented it for about 5.

 

I know I have to stay out of the UK for 5 full tax years before the UK taxman is no longer interested, but I read somewhere that if you have a property in Germany, you don't have to pay CGT on the proceeds of the sale if you own the house more than 10 years. But I don't know what the rules are if you have rented the property during any of that time.

 

Can anyone help me here.

 

Cheers

NL

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There are good reasons to sell while you are still in Germany, if you go back to UK you will become liable for CGT there. At the moment you are probably tax free from both sides but as there's a fair bit of money at stake it's worth seeing a Steuerberater.

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thanks for the replies.

 

So it is right that after 10 years, the Finanzamtleute are not interested in a slice of my gain, even if I have rented my property ?

 

I was having trouble finding any good sources on the internet (English or German) that would confirm this.

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My boyfriend just sold his house in the UK and they told hime he was exempt from CG tax if he was no longer a UK resident from 1998 onward. He moved away in 97 so is theefore exempt. I think you still have to claim it against your German taxes though since it is income whilst living in Germany! :huh:

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I'm not worried about the UK taxman. (well not for this anyway :rolleyes: )

 

I'm just worried about what Mr Finanzamt in Muenchen II is going to say about it !

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I'm just worried about what Mr Finanzamt in Muenchen II is going to say about it !

Finanzamt theme tune: "Money, Money, Money"...

 

This forum isnt the place for a definate answer.

 

Try your friendly local tax advisor (but thats no guarentee either it seems).

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I would suggest getting tax advice in the UK pertaining to your own particular circumstances. I very much doubt that you will qualify for full private residence relief as the property has not been your only or main residence for the past ten years. There are periods of absence when the house was not your only or main residence which can be treated as periods of occupation for capital gains purposes but from the information provided I do not know if you qualify for these. In any case you will only be entitled to partial relief since you rented the house for five years although you can offset a portion of this via letting relief upto a ceiling of forty thousand pounds.

 

The piece in the Times refers to tempory non-residence and capital gains tax legislation and basically means that if you realise a gain while non-resident and do not return to the UK within five full tax years of that gain, then a charge for capital gains will not accrue if you subsequently return after that period. It is all very complex and residence and ordinary residence are not defined in the Tax Acts and guidelines are largely based on court rulings.

 

I would suggest that you contact The Centre for Non-Residents who will give guidance and advice on liability to UK Capital Gains.

 

The other option is to do a Grinner but remember you still have to claim your private residence relief via HM Revenue & Customs :(

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I'm glad this came up as I'm thinking about selling my house in the UK. This hadn't even occured to me. I'll get onto that UK phone number to find out my position there, but before I pay the cash to go see a tax expert here I was wondering if anyone knows what would happen CGT wise in Germany given that I've owned it for 4 years and been living in Germany for a year and a half, it was my primary residence.

 

It looks like from the advise on this thread that I would have to pay it as I've not been a non-resident for 10 years. is that right? :blink:

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I was wondering if anyone knows what would happen CGT wise in Germany given that I've owned it for 4 years and been living in Germany for a year and a half, it was my primary residence.

OK - been there done that and bought the T-shirt. There is another thread that goes into great details on this subject. Big arguments about the wording. I got one of my German accountants involved at great length etc.

 

As far as the UK tax is concerned you are 100% clear. You have 3 years from when you last moved out, that it was your primary residence, before the issue of CGT starts to kick in. This is easy to find on all the UK websites for clarification - including the official ones.

 

I will find the thread in a minute.

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I was wondering if anyone knows what would happen CGT wise in Germany given that I've owned it for 4 years and been living in Germany for a year and a half, it was my primary residence.

OK - been there done that and bought the T-shirt. There is another thread that goes into great details on this subject. Big arguments about the wording. I got one of my German accountants involved at great length etc.

 

As far as the UK tax is concerned you are 100% clear. You have 3 years from when you last moved out, that it was your primary residence, before the issue of CGT starts to kick in. This is easy to find on all the UK websites for clarification - including the official ones.

 

Here goes:

 

Selling a house in the UK from Germany

 

 

By the way I got an answer on the thorny Capital Gains on UK house question raised above from my accountant.

 

Obviously this is advice for myself personally, and it is not I think appropriate that I publish the full answer but I think these two wee bits will give you the idea:

 

"It would certainly not be in accordance with EC rules if German Tax Laws could abolish the aims of UK Tax Laws."

 

"German Fiscal Authorities are not able to examine UK Tax Laws in detail to find out whether Zero Taxation in specific cases in the UK is or is not the result of a specific law."

 

Basically it it impossible for German written Tax Law to always fit 100% exactly to every circumstance of UK Tax Law, but it is clear to me what they were attempting to achieve with the wording.

Basically the gain is technically TAXABLE in the UK. But under UK tax law the amount payable is £0.00 - so that should and I think is the end of the matter.

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@Wizadora

 

AS JE says you are fine as the final thirty six months of your period of ownership always qualifies for relief no matter how you use the property as long as it has been your main residence at some prior point. In essense that means you will qualify for full private residence relief as long as you sell it in the next year and a half. As I said previously the UK capital gains legislation is not always clearly defined, it can be quite complex and open to various interpretations especially in the case of non residents.

 

In terms of whether you would be subject to Capital Gains in Germany when you sell your house in the UK is a completely different kettle of fish and one that I am not qualified to answer. It seems from the previous thread that there was no clear definition or answer but I would find it unlikely that the German authorities could tax you again under the double taxation agreement even though you would pay zero tax in the UK because you qualify for full private residence relief. From my understanding of the thread you would be not be liable in the German jurisdiction but it would be worthwhile to clarify that with profssional advice.

 

Let us know how you get on...

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Here is a very good webpage from the UK tax office with FAQs on CGT for non residents

http://www.hmrc.gov.uk/cnr/faqs_capgains.htm

 

 

I was wondering if anyone knows what would happen CGT wise in Germany given that I've owned it for 4 years and been living in Germany for a year and a half, it was my primary residence.

Yes, me too !!! This is actually what my original question is, but no-one seems to be saying a lot about what the Germans will want.

Does anyone know what the German rules are for CGT for property? especially if you have rented it for any part of the ownership period.

 

I have looked at the thread that JE pointed out but I can't see anything in there other than a reference to 40% (yikes :o ) ...though it's a long thread and I may have missed something and I didn't see any discussion about this 10 year ownership clause. :blink:

 

cheers

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My own personal opinion is that you cannot be taxed in Germany if you have been through the UK CGT procedure but as you say no one seems to have concrete clarification. The ten year rule you mention applies ás far as I know to German property. I do not know if it applies to UK property. Only a German tax consultant or maybe the tax office can clarify if the authorities here will charge CGT on a property in the UK because no one here seems to be sure either way.

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What an interesting forum. I wish I had seen it some time ago. The article pointed out by NaeLuck is exactly right although there are enough ifs, buts and couldbes in it to allow the interpretation of any particular circumstance in a variety of ways. The German ten year rule referred to by Elisabeth40 does seem to cover any properties no matter whether they are in Germany or the UK. However, I think Topcat1 hit the nail on the head when he says it is difficult to get anyone to confirm black on white what the situation really is.

 

The way to find out is suck it and see - but if it goes wrong nobody is going to bail you out and a mistake can be very expensive (the 40%). I have lived in Germany as a British citzen for many years longer than the two numbers in question and have gone through the exercise of selling my UK home after it had been rented out for over 15 years. Happily, the rules worked out OK. In the UK, the tax office does not charge CGT provided the annual tax returns show that you have been out of the country for the appropriate time, keeping to the rule that one has not spent more than 90 days per year visiting the UK (also taken from the tax returns - one wonders how these figures are checked and interpreted in the days of Ryanair). The German authorities consider any propery owned for more than ten years to be free from CGT wherever it is but the point about not selling more than three properties over the last five years, mentioned in the article from www.allgrund.com, must be carefully considered.

 

I am sure that Germany tax consultants (Steuerberater) are legally responsible for their advice and a reputable one will stand by what he says. It costs, of course, but the peace of mind is well worth it.

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My understanding of your situation is

 

You are non resident for UK tax so you have no UK CGT to pay.

 

You are resident in Germany so have to declare the gain here.

 

What you have to pay here will depend on how long you owned the property - I have also heard that after 10 years there is no German CGT to pay but you need to talk to Steuerberater about this.

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One question raised and then left hanging in one of the previous threads, was that although there is no CGT to pay, the gains are somehow considered part of your income, and your tax bracket is increased. This doesn't seem logical to me, but can anyone confirm or deny this ?

 

BOR

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If it counts as income then it would increase your total income for that year which would in turn increase the rate of tax you pay on everything during that year? This may depend on what you do with the money, if you are buying another home with it it may not count as income.

 

You really need to talk to a Steuerberater about this. Making a badly informed decision could be expensive.

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