Loss carryforward Stocks; Hire purchase
November 17, 2009 | 60,00 EUR | answered by Oliver Burchardt
Dear Sir or Madam,
I have the following question:
From 2003 to July 2008, I was employed in Angola and, according to a decision from the Bonn tax office, I was not fully liable for tax in Germany. Therefore, I did not file a tax return. Since July 2008, I am once again liable for income tax.
At the end of 2007, I purchased various stocks on a German bank account (registered with my foreign address) which I sold at a loss in 2008 (1st and 2nd half of the year). I have not yet filed an income tax return for 2008. Can I claim the losses from the stock sales - of course within the one-year speculation period - in my tax return?
For example, can I list: December 2007 purchase 10 shares of AB for 1000 euros
Sale in April 2008 for 300 euros = 700 euros loss.
2. I would like to sell a property worth 60,000 euros on a rent-to-own basis over 10 years for a total of 60,000 euros in monthly installments of 500 euros (no interest is charged). The buyer will pay all additional costs, maintenance costs, etc. How much of the 500 euros monthly installment do I need to consider in my tax return? (The property has been in my possession for over 20 years).
Thank you very much and best regards,
F. Gertner
Dear inquirer,
Thank you for your inquiry, which I am happy to answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided in the case. Adding or omitting information can affect the tax assessment.
1. Sale of stocks.
According to §§ 1 para. 4, 49 I no. 8 lit a. EStG in the version for the assessment period 2008, income from private sales transactions is subject to taxation in Germany for limited tax residents, if they involve shares of companies based in Germany. Only if this condition is met, taxation is considered at all. The same applies to offsetting any losses.
For private sales transactions from July 2008 onwards, i.e. the time of the revival of your unlimited tax liability, all profits from private sales transactions are taxable.
In principle, you can claim losses from such sales transactions for tax purposes. However, it should be noted that horizontal loss offsetting is not permitted, § 23 para. 3 sentence 8 EStG. Specifically, this means that you are not allowed to offset the losses from such sales with other income, but only with profits from other sales transactions.
If the total profit does not exceed 512 euros (after offsetting losses), no tax consequences will be triggered, however, you still have to declare the amounts in the "Anlage KAP" form.
2. Lease-purchase
The tax assessment of the construction you are considering is not very straightforward within such a forum, as the term "lease-purchase" can encompass several contractual arrangements. It essentially depends on whether you and the buyer seriously intend to sell at the time of contract conclusion or if the buyer is simply granted an option for later ownership acquisition. In the first case, it is referred to as an "unechter" (fake) lease-purchase, and in the second case as a "echter" (true) lease-purchase.
The tax implications are significant.
In a true lease-purchase, the ongoing lease payments are to be fully considered as rental and leasing income. Depreciations on the leased property and any other expenses will have a reducing effect. If the buyer exercises the option at the end of the term and the paid rents are credited towards the purchase price, the profit from the sale is to be calculated. However, since the 10-year limit of § 23 para. 1 no. 1 EStG is exceeded in your case, there will be no tax consequences resulting from this sale upon exercising the option.
If a fake lease-purchase is in place, the entire contract is treated tax-wise from the beginning as a purchase contract with installment payments. Since you have owned the property for more than 10 years, exceeding the 10-year "speculation period," the sale in this case will not trigger any tax consequences.
The exact determination of which type of contract is in place can only be clarified by consulting the contract text. Given the tax implications (you may have to pay up to 6,000 euros annually for a true lease-purchase, while the rules for private sales transactions apply to a fake lease-purchase), I recommend seeking advice from a local colleague. Due to my lack of knowledge of the contract, I can only provide an overview of the tax consequences.
If you have further questions, please use the free follow-up function.
I hope my explanations have been helpful to you.
Oliver Burchardt
Certified Public Accountant
Tax advisor
