Residency Duration, UK home, CGT

[MoH]

Hello all,
I hope someone may be able to help me regarding residency duration, the sale of a UK house and German capital gains tax.

I have owned a house (secondary home, never rented out) in the UK since 1998 and the original plan was to sell it and settle permanently in Germany.

I lived in Germany from October 2019 to March 2023. However, due to Covid related problems with relatives in France, I had to leave Germany in March 2023.

I understand that after 10 years of ownership, no capital gains tax is due on the sale of the UK house if I am a German resident.

My question is the following: If I were to move back to Germany tomorrow, would the previous 3.5 years of residency count OR would my residency start from tomorrow?

I would really appreciate any help on this matter and hope Panda Munich may be reading this as I do want to return and settle in Germany.

Many thanks.

MoH

[PandaMunich]

Hello all,
I hope someone may be able to help me regarding residency duration, the sale of a UK house and German capital gains tax.

I have owned a house (secondary home, never rented out) in the UK since 1998 and the original plan was to sell it and settle permanently in Germany.

I lived in Germany from October 2019 to March 2023. However, due to Covid related problems with relatives in France, I had to leave Germany in March 2023.

I understand that after 10 years of ownership, no capital gains tax is due on the sale of the UK house if I am a German resident.

My question is the following: If I were to move back to Germany tomorrow, would the previous 3.5 years of residency count OR would my residency start from tomorrow?

I would really appreciate any help on this matter and hope Panda Munich may be reading this as I do want to return and settle in Germany.

You don't need to have been a German resident for more than 10 years to profit from the profit from the sale of a house not being taxable, there is no condition in the law about needing to have been resident these 10 years.
You just need to have owned the house for more than 10 years (they go by the period between the purchase contract and the selling contract).
If you have owned a house/flat for more than 10 years, you could even have let it the entire time and the profit from selling it would still not be taxable in Germany, that is what is written in § 23 (1) Nr. 1 Satz 1 EStG: https://www.gesetze-im-internet.de/estg/__23.html

You may of course have to pay UK income tax (capital gains tax) on the profit you make, but that will happen no matter where you live at the moment you sell, since all double taxation agreements assign the taxation rights of the profit from selling UK real estate, to the UK: https://www.gov.uk/tax-sell-property

Summary:
You can move back to Germany, sell the UK house the next day and the profit will not be taxable in Germany, i.e. would not be mentioned at all in your German tax return, since you had owned the house for more than 10 years.

[MoH]

Thank you so much for your rapid reply PandaMunich. I really appreciate it.

I realise that CGT will be due in the UK and thank you for the clarification that it will not be due in Germany.

You write that the next day, after returning to Germany, I could sell the UK house and the sale will not be considered for German CGT. However, do I not have to be registered again as resident for a minimum period of time i.e.6-12 months? I deregistered (abgemeldet) myself in March 2023, thinking that I would have to be in France much longer than I actually had to. I have double nationality, French/British.

Thank you again for any clarification on this point.

MoH

[PandaMunich]

However, do I not have to be registered again as resident for a minimum period of time i.e.6-12 months? I deregistered (abgemeldet) myself in March 2023, thinking that I would have to be in France much longer than I actually had to. I have double nationality, French/British.

You being or not being registered in Germany is irrelevant, if you have moved back to Germany, you are tax resident in German.

[MoH]

Thank you again PandaMunich for your rapid reply. Your help is really appreciated.

MoH

[MoH]

Hello Panda and all members,

Sorry to bother you again with a further question regarding the future sale of our UK house once we return again to Germany (from France) and become residents.

My French husband and I are married with the French ‘séparation de biens’ marital contract or Gütertrennung. We bought the house in the UK in 1998 in our joint names. At the time, we were resident in France. In 2017, we transferred the property to my name only which in the UK gives no rise to CGT between spouses.

When I come to sell it as a German resident and in my name only (as per the title deed), does the 10-year property ownership duration begin in 1998 or 2017?

Also, is there any risk of Schenkungssteur being due?

Thank you in advance for any help.

MoH

[Aldel]

Hi, everyone on here!
Thank you, PandaMunich, for clarifying the situation with taxation in Germany after selling a UK-based property.
I am in a somewhat similar situation, but with an added layer of complexity: after selling my UK-based property ( owned> 10 years) and paying CGT in the UK, I will transfer the rest of the amount to Germany, where I reside, and would like to give the money as a present to my daughter.
Since the total amount is <400K, am I correct to understand that there won’t be any additional tax for my daughter and myself in Germany?

[PandaMunich]

Sorry to bother you again with a further question regarding the future sale of our UK house once we return again to Germany (from France) and become residents.

My French husband and I are married with the French ‘séparation de biens’ marital contract or Gütertrennung. We bought the house in the UK in 1998 in our joint names. At the time, we were resident in France. In 2017, we transferred the property to my name only which in the UK gives no rise to CGT between spouses.

When I come to sell it as a German resident and in my name only (as per the title deed), does the 10-year property ownership duration begin in 1998 or 2017?

From 1998, since you were also "gifted" the date of purchase by your husband.

Also, is there any risk of Schenkungssteur being due?

The only Schenkungsteuer (German gift tax) that would be due would be:

1. if you had been resident in Germany in 2017
   and
2. if that half of the house (plus all gifts from your husband to you in the 10 years before that date in 2017, or from the date you moved to Germany if that had been later) had been worth more than the gift tax free allowance of 500,000€ between spouses.
   
   Since neither of you were resident in Germany on the date in 2017, on which the gift happened, we can stop right here, no German gift tax is due.
   
   Of course, gift tax may be due in whatever country you lived in in 2017, when the gift happened.
   You hadn't told us where you lived in 2017.

[PandaMunich]

I am in a somewhat similar situation, but with an added layer of complexity: after selling my UK-based property ( owned> 10 years) and paying CGT in the UK, I will transfer the rest of the amount to Germany, where I reside, and would like to give the money as a present to my daughter.
Since the total amount is <400K, am I correct to understand that there won’t be any additional tax for my daughter and myself in Germany?

Yes, as long as your gifts to your daughter in the 10 year period before this big gift don't actually take you over 400,000€.

Please note that you do still have to report this gift to your gift tax Finanzamt (so that they can start keeping a list for the gifts "parent" --> daughter) with the details set down in § 30 (4) ErbStG: https://www-gesetze--im--internet-de.tr ... r_pto=wapp

[Aldel]

Thank you!

[MoH]

Hello Panda

Many, many thanks for your reply and my apologies for not responding earlier as I had not seen your reply of 25 August.

You wrote:

Of course, gift tax may be due in whatever country you lived in in 2017, when the gift happened.
You hadn't told us where you lived in 2017.

In 2017, we were resident in France.

Thanks again to you and all that this forum continues to exist.

MoH

[Aldel]

Good Evening, everybody,

apologies about a question on the same topic:)

Summary of my situation: I have sold a property in the UK that I have owned for > 10 years and (after paying CGT) gave a sum < 400,000 Euro to may daughter here in Germany as a gift (the total amount of gifts to her from my side during the last 10 years is also less than 400,000 Euro, hence no tax on the gift). I simply transferred the whole amount from my account in Deutsche Bank to her account at SparKasse.
We have also declared the gift to Finanzamt.

Yet my daughter had now received a question from her bank (Sparkasse Berlin) to provide “Herkunftsnachweis” for the source of funds for this gift from her mother. They now have requested for both of us to come to the local branch and to bring a “Nachweis” about the sale of my property.
Since I am not their client and as such, never signed any forms reg. Data Protection, confidentiality etc., I wonder if their request to me is even legal?
And if yes- how much information is really required for such a case?
I am fine to share a copy of Geschenk Anzeige that we have already provided to Finanzamt, but do I really have to provide anything else?


and

[pappnase]

The bank is subject to anti money-laundering rules and have to satisfy themselves that the transfer is legitimate.
Just go and take what they want to see, it's just easier.