Ask a tax advisor on the topic of Double taxation

House gains in Mallorca are legitimate and subject to taxation in D.

April 16, 2010 | 30,00 EUR | answered by Dipl.BW/SB Ulrich Stiller

Dear tax advisor,

Currently, one is flooded with offers regarding lottery winnings in Spain, Mallorca about the possibility of winning a house through a lottery purchase. The promotions take place online and are considered reputable, with the companies or organizers located in Austria and Cyprus. The notarial transfer is conducted by a notary in Palma.

My questions:
1.) Is this legitimate?
2.) The seller covers all taxes in Spain. What about tax obligations in Germany if the winner is a tax resident in Germany? It is claimed that this is not "taxable" and not subject to any income category. It would be unfortunate to win a 2 million house and then have to pay taxes on it at one's tax rate in Germany.
3.) Potential rental income from such a win, are they taxable in Germany due to the double taxation agreement?

Thank you for the information.

Sincerely,
sonnenengel

Dipl.BW/SB Ulrich Stiller

Dear client,

Thank you for your inquiry, which I would like to answer based on the information provided and in the context of your situation in a preliminary consultation as follows:

It is correct that such winnings are generally not subject to German income tax, as they do not fall under any of the seven types of income specified in 2 EStG. In particular, there is no income according to 22 Nr. 3 EStG, as successful participation in a lottery does not involve a mutual exchange of services (Schmidt/Weber-Grellet, EStG, 27th ed., 22 para. 133, 150). Since there is no service exchange, the transaction is not taxable.

If you rent out the won house in Mallorca, you will generate rental income. Due to the existing double taxation agreement with Spain, such income is tax-free in Germany. The taxation of this income will occur in Spain. However, these Spanish earnings will increase the tax rate on your German income under the progression clause according to 32b EStG.

Best regards,

Ulrich Stiller
Tax advisor/Graduate Business Economist