According to the German tax law, the sale of an apartment is only taxable when the apartment will be sold within ten years after the date of the purchase (§ 23 (1) No. 1 of the German Income Tax Act).
The 10 years period is only applicable if the property is owned by a private person or at least with a tax transparent structure (e.g. a Kommanditgesellschaft “KG”) and when the property was rented out.
The taxable profit is the difference between the sales price minus the book value and the expenses that relate to the sale (e.g. legal costs) (§ 23 (3) of the German Income Tax Act).
The book value is the acquisition costs reduced by the accumulated depreciation.
The acquisition costs include the sales price as well as all expenses that are connected with the purchase of the property (e.g. legal expenses).
The profit/loss deriving from the sale of the apartment is not subject to a separate capital gains tax in Germany.
Instead the profit/loss is subject to income tax and it will be added to the assessment basis that includes your further German income (e.g. the profit/loss from the letting of the apartment).
In addition, the profit from the sale can be settled with the loss brought forward from previous years.
After the sales contract was set up and signed the tax office will automatically receive a notification from the notary as well as a copy of the sales contract.
Based on the agreed sales price the tax office may assess an income tax prepayment for the tax year in which you have sold the German property. Alternatively, the tax office may withhold money from the agreed sales price that will be considered as a prepayment. In both cases the prepayment will be settled with the actual income tax liability after you will have submitted the tax return. If you intend to give away your German investment- Tax consequences We will also be able to offer assistance in terms of German inheritance tax questions if you plan to bestow your Berlin investments to family members or others.
If you need assistance:
I hope that this information are helpful for your decision making.
If you want assistance in terms of the points discussed above please contact us. We are also able to determine the value of your property and can help you with the selling procedure.
Our Contact details:
Alexander Korte Immobilien