FTCR – British Capital Gains Tax & German Income Tax

Dear Team at HMRC, I am a UK resident and pay UK tax on the arising basis. I plan to sell a buy-to-let property in Germany in May 2024. There will be a gain which will definitely be subject to tax in Germany. The 2010 UK/Germany Double Taxation Convention states in Article 6 and Article 13 Germany (that other state) may tax this gain. The German tax authorities will charge “Einkommensteuer” (English: income tax) on this property gain. I will declare this in my German tax return for 2024 and will pay the German tax due. I understand in the UK I am taxed on my worldwide income and have to report this as a property capital gain in my 2024/25 self assessment (SA106 and SA108). The chargeable gain is re-calculated under UK tax law. My research shows that I can claim FTCR (foreign tax credit relief) in this situation, even though the tax paid in Germany is income tax and the tax payable in the UK is capital gains tax. The German income tax collected and paid on this property gain should generate FTCR for my UK capital gains tax liability. This FTCR should effectively reduce or eliminate my UK Capital Gains Tax liability. I would be much obliged if you could kindly confirm this. In case you cannot confirm this, maybe you could help me understand by giving an explanation. Many thanks in advance.

Hi,
Yes you can claim foreign tax credit relief on the Germabn tax paid in order to reduce any UK tax that is due. the relief cannot exceed the UK tax due.
Thank you.