Germany To Delay Capital Gains Tax Hike

by Ulrika Lomas, Tax-News.com, Brussels

13 February 2006

A plan by the German government to introduce a tax on capital gains accrued from the sale of stocks and property by private investors may be postponed by one year until 2008.

Social Democrat finance spokesman Joerg-Otto Spiller Merkel told Bloomberg News in an interview last week that the introduction of the 20% tax may be tied in with the government's plan to overhaul company taxation from 2008.

Under current rules, investors may avoid being charged capital gains tax on share sales if they have owned the stock for more than one year. Similarly, proceeds from property sales are exempt from capital gains tax if the real estate is held for at lest ten years.

In an effort to narrow Germany's EUR35 billion budget deficit and bring its finances back into line with the European Union's Stability and Growth Pact, the coalition led by Chancellor Angel Merkel agreed in November 2005 to close a number of tax loopholes, abolish tax breaks and employment subsidies and raise taxes.

It has been estimated that the expansion of capital gains tax liability for private investors will bring some EUR1 billion in additional revenues for the government.

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