Anyone selling a property from their private assets must pay tax on the profit as a so-called private disposal transaction if less than ten years have elapsed between the purchase and the sale. This ten-year period is set out in section 23(1), first sentence, no. 1 of the Income Tax Act (EStG). In its ruling of 18 June 2026 (Ref. IX B 24/26), the Federal Fiscal Court (BFH) has once again clarified exactly how this period is to be calculated.
When does the deadline start and end?
According to the Federal Fiscal Court (BFH), the decisive factor is the date on which the binding contracts under the law of obligations were concluded. In the case of property, this is usually the notarised purchase agreement, i.e. the date of notarisation. By contrast, the date on which beneficial ownership actually passes – such as the date the keys are handed over or the date of entry in the land register – is irrelevant.
This case law is not new. The Federal Fiscal Court (BFH) has already confirmed this principle in several judgements, most recently in its judgement of 26 October 2021 (Ref. IX R 12/20). The current decision reaffirms this line of reasoning and declined to re-examine the issue in appeal proceedings, as it has long since been settled.
What was the specific dispute?
The claimant had sought leave to appeal on the grounds that he believed the time limit should be linked to the transfer of beneficial ownership, rather than to the conclusion of the contract. The Bremen Finance Court had already dismissed his claim in its judgement of 5 February 2026 (Case No. 1 K 57/25). The Federal Fiscal Court (BFH) dismissed the appeal against the refusal to grant leave to appeal: the legal issue had been clearly resolved and did not require further clarification.
The Federal Fiscal Court (BFH) also explicitly pointed out why basing the assessment on the binding transaction is objectively sound: if the transfer of economic ownership were taken as the basis, the contracting parties could freely determine the timing and thus circumvent tax liability at will. This is to be avoided.
What does that mean in practice?
For owners wishing to sell a property, this decision has practical implications: anyone wishing to check whether the planned sale is subject to tax or not must compare the dates on the deeds of sale, not the dates of the handover or the land registry entry.
- The date of acquisition is the date on which the notarised contract of sale was drawn up at the time of purchase.
- The date of sale is the date on which the notarised contract of sale is drawn up.
- If there is a period of at least ten years between the two dates, the capital gain is generally tax-free.
- If the period is shorter than this, income tax may be payable on the profit.
An exception applies if the property was occupied by the owner during the year of sale and in the two preceding calendar years. In this case, the tax liability does not apply, regardless of the time limit.
Anyone who is unsure whether a planned property sale is subject to tax or what options are available should have this checked from a tax perspective in advance, in order to avoid any unpleasant surprises after the sale.
Source: BFH rulings
This article was created with the help of AI and has been editorially reviewed.
