capital gains tax
noun · Veräußerungsgewinn
There is no single German capital gains tax. The gain is a Veräußerungsgewinn, but how it is taxed depends on what was sold: securities under the flat Abgeltungsteuer, § 32d EStG; other private assets only within the holding periods of § 23 EStG; business assets as ordinary income.
Which translation, when
Why
Capital gains tax has no German twin, because Germany never built one tax for gains; it spreads them across three regimes and the rate turns on which applies. Gains on securities and other Kapitalvermögen fall under § 20 Abs. 2 EStG and are taxed at the flat 25 per cent Abgeltungsteuer, § 32d EStG, usually withheld at source, and this is what most resembles the UK tax. A substantial shareholding of at least 1 per cent is the exception, its gain taxed under § 17 EStG at the personal rate on 60 per cent of the amount, not at the flat rate. Gains on other privately held assets are taxable only as a privates Veräußerungsgeschäft and only inside a holding period, § 23 EStG: ten years for real estate, one year for movable assets, with an owner-occupied home exempt, and outside the period the gain is simply free. Gains on business assets are ordinary income, §§ 15 and 16 EStG, though the sale of a whole business draws an allowance and a reduced rate, § 16 Abs. 4 and § 34 EStG. So the English single tax, the Taxation of Chargeable Gains Act 1992 with its one set of rates and an annual exempt amount, has no counterpart: whether a German gain is taxed at all, at 25 per cent, or at the personal rate depends on the asset, and a translation that names one capital gains tax flattens that choice.
Typical mistakes
- There is no single Kapitalertragsteuer that answers to capital gains tax: Kapitalertragsteuer is the withholding on capital income, and a private real-estate gain runs through § 23 EStG, a business gain through §§ 15, 16 EStG instead.
- Whether a private gain is taxable at all turns on a holding period, § 23 EStG, ten years for real estate and one year for movables, so treating every capital gain as taxable is wrong for German private assets.
- The flat 25 per cent, § 32d EStG, reaches securities gains, not real-estate or business gains, so applying one rate across the board misstates the tax.
What matters
Advising a UK client on selling a German holding, the memo has to pick the regime, because the answer changes with the asset: the flat Abgeltungsteuer on shares, § 32d EStG, the ten-year clock on real estate, § 23 EStG, or ordinary income on a business sale. Naming a single capital gains tax, as if the Taxation of Chargeable Gains Act 1992 had a German mirror, hides the question that decides the bill.
What the machine misses
Machine output renders capital gains tax as Kapitalertragsteuer or a coined Kapitalgewinnsteuer, and both mislead. Kapitalertragsteuer is the withholding on capital income, and Germany has no single tax on gains at all: securities run through the flat Abgeltungsteuer, § 32d EStG, private real estate only within the ten-year period of § 23 EStG, business assets as ordinary income. The rendering hides that the regime, and with it whether there is any tax, depends on the asset.
Examples
| liable to capital gains tax | der Besteuerung des Veräußerungsgewinns unterliegen |
| a capital gains tax exemption | eine Steuerbefreiung für den Veräußerungsgewinn |
| the gain is within the holding period | der Gewinn fällt in die Haltefrist |
| capital gains on shares | Veräußerungsgewinne aus Aktien |
More notes on these sections
income tax Einkommensteuer
withholding tax Quellensteuer