Collection and payment of property income tax

As with the Real Estate Transfer Tax Act, capital gains tax for sales of land in the private sector is, in principle, collected/paid by representatives of the parties (notaries or lawyers). This is mandatory in all cases where the representative of the parties also calculates the buyer's real estate transfer tax (→ BMF)German text him/herself.

As with capital gains tax, the income tax (property income tax) calculated and paid by way of the self-assessed calculation by the representative of the parties on the basis of information provided by the seller essentially has a final taxation effect (final withholding effect), meaning that there is no longer any obligation to include the income from the sales transaction in the income tax return.

However, as with capital gains tax, voluntary inclusion in the tax return (what is known as the "assessment option") is possible while retaining the special tax rate of 30 percent; this is advantageous, for example, if a loss is incurred from another property sale and the intention is to offset this against the capital gains (by way of the income tax assessment). However, an assessment may also serve to rectify an incorrect calculation (for example, repair costs that have not yet been taken into account). If the self-assessed calculation is incorrect due to the information provided by the seller being inaccurate or incomplete, the taxation effect is not final.

Aside from the assessment option, in which the special tax rate is maintained, an assessment at the regular tax rate (what is known as the "regular taxation option") is also possible, however. Such an option may be useful if the standard income tax to be applied on capital gains (particularly as a result of losses from other sources of income) is less than 30 percent of the assessment basis.

Advice

If no property income tax is paid by the representative of the parties, the seller is obliged to pay a special advance payment amounting to 30 percent of the relevant assessment basis. This special advance payment does not have a final withholding effect; it then counts towards the income tax payable on the property transaction by way of the income tax assessment.

Regardless of whether or not self-assessed calculation and payment of the property income tax is carried out by the representative of the parties, the representative of the parties must still send the relevant information from the property transaction to the tax office.

Example

Self-assessed calculation of the property income tax by the representative of the parties
A representative of the parties is charged with handling a property transaction involving a commonhold property. In this context, he/she is also charged with carrying out a self-assessed calculation in accordance with the Real Estate Transfer Tax Act.
If the representative of the parties carries out a self-assessed calculation for real estate transfer tax purposes as requested, he/she is also obliged to notify the tax office that is responsible for the collection of income tax from the seller and, generally speaking, to perform a self-assessed calculation for real estate income tax purposes. The seller submits the purchase agreement relating to the current acquisition of the apartment to the representative of the parties and confirms, in writing, the accuracy and completeness of the information that he/she has provided. On the basis of the costs of acquisition specified therein, the representative of the parties calculates the income and pays the property income tax. The income tax from the property sale is, in principle, settled upon payment of the property income tax

Example

Making a special advance payment on the part of the taxpayer
A representative of the parties is charged with handling a property transaction involving a commonhold property. The representative of the parties submits the tax declaration for real estate transfer tax purposes, but does not carry out the self-assessed calculation for real estate transfer tax purposes.
Real estate income tax is only withheld and paid in cases where a voluntary self-assessed calculation takes place under the Real Estate Transfer Tax Act. If, as in the present case, no property income tax is paid on sales, the taxpayer him/herself must make a special advance payment in the amount of the property income tax (30 percent) within the deadline set for payment thereof (at the latest on the 15th day of the second calendar month following the calendar month in which the funds from the sale were received). No property income tax is paid even if it is expected that income will start to be generated after 1 year, e.g. because the buyer pays in instalments. Unlike property income tax, the special advance payment made in these cases by the seller does not have a final withholding effect; the taxpayer must therefore issue a tax return and this counts towards income tax liability in the assessment. The representative of the parties must communicate the relevant information from the property transaction to the tax office.

Translated by the European Commission
Last update: 1 January 2021

Responsible for the content: Federal Ministry of Finance