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Investment Tax (Kapitalertragsteuer)

Germany withholds 26.375% tax on dividends, interest, and capital gains. The first €1,000 of annual income is tax-free (Freistellungsauftrag).

Rate​

ComponentRate
Kapitalertragsteuer25%
Solidaritätszuschlag5.5% of tax
Kirchensteuer (if applicable)8–9% of tax
Total26.375% (without church) or 27.8–28.0% (depending on state)

Investment Tax Structure

What Is Taxed​

  • Dividends
  • Interest on deposits
  • Profits from selling stocks, ETFs, funds
  • Vorabpauschale (annual deemed income for accumulating funds)

Freistellungsauftrag — Tax-Free Allowance​

€1,000 per year per person (€2,000 for couples).

Submit a Freistellungsauftrag to your bank/broker — and the first €1,000 of profit won't be taxed.

Distribute Your Allowance

If you have multiple banks/brokers, distribute €1,000 among them. Total shouldn't exceed the limit.

How It's Paid​

German banks and brokers automatically withhold tax (Abgeltungsteuer). You don't need to do anything.

Foreign brokers don't withhold German tax — you need to declare it yourself.

Vorabpauschale​

Annual "advance tax" on accumulating (Thesaurierende) ETFs/funds.

  • Calculated from the base rate (Basiszins) published by the Federal Ministry of Finance (BMF)
  • Paid in January for previous year
  • Reduces tax when selling

Teilfreistellung — Partial Exemption​

Stock ETFs receive tax exemption:

Fund TypeExemption
Aktienfonds (≥51% stocks)30%
Mischfonds (≥25% stocks)15%
Immobilienfonds (domestic)60%
Auslands-Immobilienfonds (foreign)80%

So when selling stock ETFs, you pay tax not on the full profit, but on 70%.

FAQ​

Not legal or financial advice.

I have investments in my home country. Do I need to declare them in Germany?​

Yes. Once registered in Germany, you have unlimited tax liability (unbeschränkte Steuerpflicht) — worldwide income must be declared. Dividends from stocks at a Russian or Ukrainian broker, interest from foreign deposits — all must be reported in Anlage KAP. Germany and Russia have a double taxation agreement (DBA): tax withheld in the source country is credited against German tax (Anrechnungsmethode). In practice: if a Russian broker withheld 13%, Germany charges the difference up to 26.375%. Declaration is mandatory even if the amount is below the Freistellungsauftrag.

I sold cryptocurrency after holding it for over a year. Am I tax-free?​

Cryptocurrency in Germany is taxed as "other income" (§ 23 EStG), not as capital gains. If held for more than 1 year (Spekulationsfrist), the profit is completely tax-free — with no amount limit. If held less than 1 year, there is a tax-free threshold of €600/year (Freigrenze, not Freibetrag — if exceeded, the entire amount is taxed). The tax rate is your personal income tax rate (up to 45%), not the flat 25%. Every transaction (crypto-to-crypto exchange, paying for goods with crypto) is a taxable event. Accounting uses the FIFO method (first in, first out).

My broker is in Lithuania (Interactive Brokers). How do I pay taxes?​

Foreign brokers do not withhold German Kapitalertragsteuer automatically. The obligation to declare and pay tax is yours. All income (dividends, capital gains, interest) is reported in Anlage KAP when filing Steuererklärung. You cannot set up a Freistellungsauftrag with a foreign broker — the €1,000 deduction is applied when filing. Withholding tax deducted in the issuer's country (e.g., 15% US dividend tax via W-8BEN form) is credited against German tax. Filing a return is mandatory when holding accounts with a foreign broker.

Can I offset stock losses against ETF gains?​

Losses from selling stocks (Aktienveräußerungsverluste) can only be offset against gains from selling stocks — not against dividends, not against ETF gains, not against interest (§ 20 Abs. 6 EStG). This is one of the most disadvantageous rules in German tax law. Losses from ETFs, bonds, and other instruments can be offset against any capital income. Unused losses carry forward automatically to future years (Verlustvortrag). The broker tracks losses (Verlustverrechnungstopf) automatically — with multiple brokers, losses can be consolidated via Verlustbescheinigung (must be requested by December 15 of the current year).

My personal tax rate is below 25%. Can I pay less Kapitalertragsteuer?​

Yes, through the Günstigerprüfung (favorability check) mechanism. When filing Steuererklärung, check the "Günstigerprüfung" box in Anlage KAP. The Finanzamt compares your personal rate with 25% and applies the lower one. This is relevant for people with low taxable income — students with part-time work, retirees, first year in Germany with partial employment. With annual income up to ~€17,000 (singles), the personal rate is below 25%. Banks do not perform this check automatically — only through the tax return.

Sources​