Speculation period: You should pay attention to this when selling your property

Selling property in Munich: What is speculation tax all about?

In Germany, private investment and speculative transactions are generally taxed: this applies not only to trading in investment products such as shares, fund units and precious metals, but also to houses, flats and other properties. If such a property is sold, for example in Munich, and realises a higher price than at the time of purchase, this difference - the profit from the sale - is subject to speculation tax, the amount of which corresponds to the respective income tax rate of the seller. The tax-free amount per person is 600.00 euros and therefore only covers smaller gains. However, there are a number of ways to reduce the resulting tax burden or even be completely exempt from the obligation to pay speculation tax. For example, the costs for the estate agent can be deducted from the taxable gross profit, as can notary fees or any procedural costs relevant to the sale, such as those incurred when changing the land register entry. In addition, private property sales are exempt from tax liability after the so-called speculation or ten-year period has expired, as Engel & Völkers Munich explains in the following section.

Find out whether you have to take the speculation period into account for your property sale

If a property was purchased more than ten years ago, speculation tax no longer has to be paid, regardless of how the property was used during this period. The decisive factor is the date on which the purchase contract was notarised. However, the speculation period can also be shortened or even cancelled completely in some cases. For example, if the flat or house has been continuously occupied by the owner, no speculation tax is due within the ten-year period. There is a further exception for rented properties: if the property was rented out for less than ten years, but then used by the owner for at least two years and in the year of sale, no speculation tax is payable either. As there are a number of other special cases, estate agent Engel & Völkers Munich would like to briefly discuss these below.

Special regulations on speculation tax: inheritance, business, modernisation

A frequently asked question to our estate agents is to what extent inherited houses or flats in Munich fall under the speculation period. The answer is: In principle, the duration of the ten-year period remains unaffected by an inheritance, which means, however, that the time of purchase by the testator is decisive here, not the time of transfer of ownership to the beneficiary. If the property was previously occupied continuously by the deceased themselves or by the heirs or children of the deceased for more than three calendar years rent-free, it can also be sold without paying speculation tax.

Furthermore, when selling houses and flats in Munich, a distinction is made between private and commercial transactions, whereby the boundaries for owners are not always clearly recognisable. The so-called three-property rule can be used as a guide, which states that anyone who sells three or more properties within five years is considered a commercial trader. Nevertheless, the tax office can interpret this rule flexibly if there is a clear intention to make a profit from the sales. This may be the case, for example, if original rental flats are first extensively modernised and then sold as condominiums. The following then applies: traders must also pay speculation tax in addition to trade tax, regardless of the ten-year period that only applies to private sellers. In order to be on the safe side in terms of tax law when selling your property, real estate agent Engel & Völkers Munich will be happy to refer you to an experienced expert who can provide you with individual and reliable advice on your matter.

Speculation period expired? Why you should commission us to sell your property now!

If you are a private property owner with owner-occupation and are not affected by speculation tax or if the ten-year period for your house or flat in Munich has expired, the timing for your profitable sale could hardly be better. Over the last 5 years, prices for detached and semi-detached houses have risen by an average of 26.0 per cent, while condominiums have even recorded an increase of 52.8 per cent. Considering a ten-year period relevant for tax liability, even greater increases in value can be assumed. As you do not have to pay tax on the profit resulting from a sale as soon as the speculation period has expired, you will hardly find a better moment than at precisely this point in time.

Benefit from competent marketing by the expert estate agents at Engel & Völkers Munich and make the most of your property sale opportunities. We not only ensure appropriate pricing on the basis of a careful value analysis of your house or flat, but also realise the entire sales process for you conscientiously and professionally, right up to the successful transfer of ownership. You will benefit from the interdisciplinary training of our real estate agent teams in Munich, our extensive network of contacts and our property-specific, individualised sales strategies.

Convince yourself of the quality of our range of services and let us introduce you to the facets of our offer in a free and non-binding initial consultation.