“Expropriation of land not a private sale transaction.”

Private land, buildings, apartments, etc., which are sold within ten years of acquisition are generally subject to income tax on their change in value in accordance with Section 23 (1) Sentence 1 No. 1 EStG. An exception regularly applies to properties that were used for own residential purposes for a certain period of time prior to the sale.

Expropriation of private land

In the context of infrastructure measures (e.g. expansion of the road and rail network) or for mining, land is also expropriated. Compensation shall be granted to the previous owner for the resulting loss of ownership and for any further pecuniary disadvantages arising therefrom. In the case of expropriation of private land, the question arises as to whether this should be considered a private sale transaction.

According to a recent decision, the Federal Fiscal Court does not consider the expropriation to be a private sale transaction, as there is no “sale” involved. The characteristic of a sale or acquisition is the deliberate economic activity by the taxpayer. In the case of expropriation, on the other hand, there is no intentional transfer of ownership.

Therefore, the changes in the value of a private property realized through compensation are not subject to income tax.