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I am a U.S. citizen living in Germany and would like to sell some movable property at a higher price than I bought it for. I held it for longer than a year, so I am not subject to German taxation. U.S. taxes for the same situation are 15% capital gains.

The U.S.-German tax treaty Article 13 paragraph 5 says:

Gains from the alienation of any property other than that referred to in the preceding paragraphs shall be taxable only in the Contracting State of which the alienator is a resident.

Which applies to me? Do I have to pay the 15% capital gains tax to the U.S. because I am a citizen, or do I pay nothing because of the treaty?

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My understanding (not tax advice) is that you have to pay the US tax, since Article 13 paragraph 5 does not apply for US Citizens.

In fact the U.S.-German tax treaty states in Article 1, paragraph 4a that the treaty basically does not apply to US Citizens at all:

Except to the extent provided in paragraph 5, this Convention shall not affect the taxation by the United States of its residents (as determined under Article 4 (Residence)) and its citizens.

The only exceptions are listed under paragraph 5, but Article 13 paragraph 5 (movable property gains) is not one of these exceptions.

Dual language latest version of the tax treaty: latest version from http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Internationales_Steuerrecht/Staatenbezogene_Informationen/Laender_A_Z/Verein_Staaten/2008-06-23-USA-Abkommen-DBA-Bekanntmachung.pdf?__blob=publicationFile&v=3 )

If anyone has additional information regarding this particular tax situation, please add a comment.

  • Much appreciated. – cmc Jan 2 '18 at 9:22

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