date | theme

29. January 2020 | Avoid real estate transfer tax: tax-free real estate transferred to partnership!

18. January 2021 | Saving taxes abroad: Is there a perfect tax haven?

18. May 2021 | Influencer – Saving Taxes with a GmbH

13. October 2021 | Flat rate tax and lower tax rate with increasing income: Save taxes in Switzerland!

02. November 2021 | Private sale business after free transfer: Save taxes! (this contribution)

Private sale transactions are subject to taxation if they fall below the holding periods regulated by § 23 EStG. The BFH has recently recognized a design that leads to tax savings. This is based on the fact that the property is transferred free of charge to family members before the sale. We explain this design in the following and indicate what you have to pay attention to.

Income from private divestiture transactions belongs to the other income according to § 22 no. 2 EStG. § 23 EStG specifies which transactions are to be subsumed as private sales transactions and how the income is determined and taxed. Therefore, § 23 EStG leads to increases in the value of an asset of the taxpayer’s private assets realised within a certain period between acquisition and sale being subject to income taxation. However, according to § 23 II EStG, the private sale transactions may not have to be assigned to any other type of income. Therefore, in particular, no commercial income may be available. In addition, the income tax is subject to unlimited tax liability of the entire world income. Therefore, asset sales abroad can also be taxed as a private sale business in Germany. However, the regulations of a double taxation agreement must be considered as a priority.

The main application of the private sale transactions is the sale of land. Therefore, according to § 23 I 1 N. 1 EStG, private sale transactions concerning real estate and rights to which the provisions of civil law on real estate apply are taxable. These include, for example, inheritance rights or mineral extraction rights. Nevertheless, it is also necessary here that the period between acquisition and sale is not more than ten years. On the other hand, real estate disposals are tax-free after more than 10 years. Also the sale of assets used exclusively for own residential purposes in the period between acquisition or completion and sale or in the year of sale and for own residential purposes in the two preceding years. A home office in the house is also harmless, as it is basically also used in a small private way. Therefore, the sale of their home is usually not subject to taxation.

Divestments of assets other than real estate are considered to be private divestments if there is not more than one year between divestment and acquisition. Only sales of everyday goods are excluded from taxation. In the context of the delimitation, the suitability for increasing the value is decisive. Nevertheless, the demarcation is difficult. For example, Champions League tickets were no longer classified as everyday use assets. Therefore, this sale is in principle taxable.

Within the scope of the design possibility, the attribution of income from private sales transactions is of central importance. These are in principle attributable to the taxable person who owns and disposes of the asset. In the context of individual succession, the legal successor enters into a legal position of the legal predecessor. In this case, according to § 23 I 3 EStG, the acquisition or transfer of the economic property into private assets by the legal predecessor is attributable to the successor in individual cases.

Through a certain design possibility, you can save taxes in the context of private sales transactions. If you want to sell a property within the retention period, the sale is taxable as a private sale transaction. Now you can transfer the house to your children free of charge before the sale. These are usually subject to lower taxation, which can result in a significant tax saving. Nevertheless, as a parent, you can still organize the sale of the property. Nevertheless, you do not have to include profit from private sale business in the tax return.

This design means is recognized by the BFH and does not constitute misuse of design. The reason for this is that precisely these arrangements are covered by § 23 I 3 EStG. Therefore, the case is regulated by law in an abuse regulation. The purpose of this standard is to tax the person who received the capital gain. In our case, these are the children. That is why taxation must also take place with them. The fact that taxes are saved by this alone is not reprehensible since the law accepts the free transfer of the property and stipulates that the taxation takes place with the gifted person according to his personal circumstances.

Nevertheless, the individual contracts should of course not be unusual. In addition, it is of course important to check first whether the taxation of children is lower or to whom the economic good can be transferred instead. Accordingly, you can also transfer the property to your spouse, for example. Therefore, it is worthwhile discussing all design options with your tax consultant in advance of the sale.