Capital gains tax regarding the sale of a condominium
December 28, 2020 | 75,00 EUR | answered by Steuerberater Knut Christiansen
My daughter bought a condominium on 01.10.2011. I have been living in this apartment rent-free from 01.10.2011 to 31.08.2017. Since 01.09.2017, the apartment has been rented out and normal rental income is generated. At the end of January/beginning of February 2021, the apartment is now to be sold, with a profit compared to the purchase price in 2011. Question: Does the 40% speculation tax apply in full? My daughter has read that if no rental income was generated for the first 3 years after purchase because the apartment was rented out rent-free to direct relatives, the speculation tax will not be levied if the apartment is sold before 01.11.2021. Is this assumption correct, or will the 40% speculation tax be levied on the difference between the purchase and sale price? I would be grateful for clarification on this matter.
Sincerely,
Christel Küßhauer
Good day and thank you for using ask-a-tax-expert.com!
I would be happy to answer your question as part of an initial consultation.
Unfortunately, your daughter's assumption is not correct. The exemption from taxation applies to the sale within the 10-year period only if the property was used for own residential purposes in the year of sale and in the two preceding years. Therefore, it would be necessary for your daughter to have used the apartment for her own residential purposes in the year 2021 (up to the sale), the entire year 2020, and at least on December 31, 2019. Since this was not the case, the sale or the profit would be subject to taxation and taxed with income tax (commonly referred to as "speculation tax"). The tax on the profit is also not a fixed rate (40%), but depends on the individual income situation. The profit is reported in the income tax return and then taxed together with the rest of the income.
To avoid taxation, it would be advisable to move the sale date to October 2, 2021. It is important that there is a period of at least 10 years between the two notarial purchase contracts.
I hope I have answered your question, if not, please feel free to reach out again.
Kind regards,
Knut Christiansen
Tax advisor
