‘Old properties’

This term is understood as referring to properties that were acquired prior to 31 March 2002 and were thus, in principle, not liable for tax on 31 March 2012 (i.e. the basic ten-year speculation period provided for by law prior to the 1. Stabilitätsgesetz 2012German text had already expired). These properties are subject to the following calculation of the flat-rate costs of acquisition:

  • Generally speaking, the costs of acquisition are fixed at a flat rate of 86 % of the proceeds of the sale. The taxable capital gain thus amounts to only 14 % of the proceeds of the sale. This is subject to taxation at the special tax rate of 30 % (from 2016; previously 25 %). In practice, this means that the tax burden amounts to 4.2 % (from 2016; previously 3.5 %) of the proceeds of the sale.

Caution

The proceeds of the sale are to be distinguished from the capital gain: the capital gain results from the difference between the proceeds of the sale and the costs of acquisition.

  • If, after 31 December 1987 – and after the most recent acquisition against payment – the classification was changed from grassland to building land, the costs of acquisition are fixed at a flat rate of only 40 % of the proceeds of the sale rather than 86 %. In this way, the increase in value associated with the reclassification should be recorded as a flat rate. This has often been referred to as the ‘reclassification tax’ in public debate, which is, however, misleading in that it is not the actual reclassification itself that triggers the taxation, but rather the subsequent sale of the reclassified property. The taxable capital gain thus amounts to 60 % of the proceeds. This is subject to taxation at the special tax rate of 30 % (from 2016; previously 25 %). In practice, this means that the tax burden amounts to 18 % (from 2016; previously 15 %) of the proceeds of the sale.

In both cases, at the request of the taxpayer, the proceeds of the sale may also be calculated on the basis of the actual (and adapted if necessary) costs of acquisition of the property (‘regular determination of income’).

Example

Sale of a property (old property)
A holiday home was purchased for EUR 100 000 in 1990 and sold for EUR 170 000 in 2019. The additional proceeds thus amount to EUR 70 000.
As the property was acquired prior to 31 March 2002, in practice the tax burden amounts to 4.2 % (from 2016; previously 3.5 %) of the proceeds of the sale, i.e. EUR 7 140: the costs of acquisition are fixed at a flat rate of 86 % of the proceeds of the sale. The balance of 14 % is to be recorded at the special tax rate of 30 % (from 2016; previously 25 %).

Example

Sale of a reclassified property (old property)
A property was acquired for EUR 5 000 in 1985, reclassified from arable land to building land in 1995, and sold for EUR 30 000 in 2019.
As the property has been reclassified, in practice the tax burden amounts to 18 % (from 2016, previously 15 %) of the proceeds of the sale, i.e. EUR 5 400: the costs of acquisition are fixed at a flat rate of 40 % of the proceeds of the sale. The balance of 60 % is to be recorded at the special tax rate of 30 % (from 2016; previously 25 %).

Example

Sale of a reclassified property with a building (old property)
A property has been owned by a family for generations (the original costs of acquisition are not known). The property was reclassified to building land in 2001. A holiday villa was built on the property in 2003; it is a self-constructed building. The construction costs for the holiday villa amount to EUR 400 000. The property, including the holiday villa, is sold for EUR 600 000 in 2019 (EUR 500 000 for the holiday villa, EUR 100 000 for the land).
A distinction must be made between land and buildings when determining the capital gain. The proceeds of the sale relating to the land (EUR 100 000) are, in practice, subject to taxation at 18 % (from 2016, previously 15 %) of the proceeds of the sale, i.e. EUR 18 000. The proceeds of the sale relating to the self-constructed building (EUR 500 000) are not subject to taxation, as the tax exemption for self-constructed buildingsGerman text applies.

Advice

No further deductions should be made under this flat-rate calculation method, with the exception of the flat-rate costs of acquisition. If, within the last 15 years, the costs of building the sold property have not been deducted by depreciation for normal wear and tear, but have rather been subject to accelerated depreciation under Section 28(3) of the Einkommensteuergesetz (e.g. expenses under Sections 3 to 5 of the Mietrechtsgesetz over 15 to ten years), half of the depreciations are to be (re)added to the income at a flat rate.

In addition to the flat-rate calculation method at the special tax rate of 30 % (from 2016; previously 25 %), it is also possible to exercise the regular taxation option. From 2016, the deduction of operating expenses or professional expenditure is also permitted.

Legal basis

Translated by the European Commission
last update: 1 January 2020

responsible for content: Federal Ministry of Finance

Rate this page and help us to improve.