Freistellungsauftrag — Tax Exemption

Freistellungsauftrag (tax exemption order) exempts the first €1,000 of capital income per year (€2,000 for married couples) from taxation [1]. Without it, the bank withholds 26.375% tax even on minimal income. Savings — up to €264 per year [2].

How It Works

Germany taxes capital income at 25% + solidarity surcharge 5.5% of the tax + church tax (if applicable) — totaling 26.375% [2].

Without Freistellungsauftrag: Bank withholds tax from the first euro of income. You can recover overpayment through tax return, but have to wait 6-12 months.

With Freistellungsauftrag: Bank does not withhold tax up to the exemption limit. Money stays in your account immediately.

Who Needs This

Situation	Priority	Why
Have a savings account or ETF portfolio	High	Avoid automatic tax withholding
Capital income under €1,000/year	Medium	Save up to €264, no tax return needed
Only salary, no investments	Low	Exemption doesn't apply

Boat Phase: Set it up when opening a depot or savings account — takes 2 minutes.

Savings Examples

Annual Capital Income	Tax Without FSA	Tax With FSA	Savings
€500 (dividends)	€132	€0	€132
€1,000 (interest + dividends)	€264	€0	€264
€1,500	€396	€132	€264

Calculated at 26.375% rate (25% tax + 5.5% solidarity surcharge) [2].

How to Set Up

Process takes 2-5 minutes online:

1. Log into your broker or bank account
2. Find the "Steuern" (taxes) or "Freistellungsauftrag" section
3. Enter the exemption amount (maximum €1,000 per person)
4. Confirm — changes take effect immediately

Important: The order is permanent. You can cancel or modify it anytime.

If You Have Multiple Accounts

Total limit — €1,000 per year per person across all banks and brokers [1]. Distribute it among accounts:

Example Distribution	Trade Republic	ING Depot	Sparkasse	Total
Option 1	€1,000	€0	€0	€1,000
Option 2	€700	€300	€0	€1,000
Option 3	€500	€300	€200	€1,000

Principle: Allocate more where you expect higher capital income (dividends, interest, sale profits).

For Married Couples

Spouses combine limits — joint Freistellungsauftrag for €2,000 [1]. Conditions:

• Marriage officially registered
• Account opened as joint account (Gemeinschaftskonto)

If accounts are separate — each sets up their €1,000 independently. Tax class doesn't affect the limit amount.

What Happens If You Don't Set It Up

Bank withholds tax automatically. You can recover it through Steuererklärung (tax return), but:

• Refund takes 6-12 months
• You lose time value of money
• Need to file tax return (Anlage KAP)

Bottom line: Set up Freistellungsauftrag in advance — easier than recovering tax through tax return.

Common Mistakes

Mistake	Consequence	How to Avoid
Allocated more than €1,000 total across all accounts	Banks report to tax office, possible penalty	Track your distribution
Forgot to set up at new broker	Tax withheld, refund through tax return	Set up immediately when opening account
Entered €1,000 at each bank (didn't distribute)	Exceeded limit, penalty up to €25,000 [3]	Keep a list with amounts per account

Checking Current Status

Verify where you've already set up Freistellungsauftrag:

• Bank/broker account → "Steuern" section
• Annual tax certificate from bank (Jahressteuerbescheinigung)
• Contact bank support

If amount is distributed incorrectly — change it anytime online.

FAQ

Not legal or financial advice.

I have accounts at 3 banks — how do I split the EUR 1,000 limit correctly?

The total Sparerpauschbetrag (saver's lump sum, tax-free allowance for capital income) is EUR 1,000 per person per year across all banks and brokers combined. Allocating proportionally to expected capital income per account is a common approach. Example: if Trade Republic generates EUR 600 in dividends, ING EUR 300 in interest, and Sparkasse EUR 50 in interest, the Freistellungsauftrag (FSA, tax exemption order) could be set at EUR 600 / EUR 300 / EUR 100. The allocation can be changed during the year if estimates prove inaccurate. If the total FSA across all banks exceeds EUR 1,000, banks report this to the Bundeszentralamt fur Steuern (BZSt, Federal Central Tax Office), and a fine of up to EUR 25,000 is possible. A practical approach: assign the full EUR 1,000 to the account with the most income and leave the others at EUR 0.

I arrived in Germany mid-year — does the full EUR 1,000 apply?

Yes. The Sparerpauschbetrag (saver's lump sum) applies for the full calendar year regardless of when tax residency began. Even if the move to Germany happens on December 1, the full EUR 1,000 exemption applies for that year. The exemption covers capital income earned in Germany or declared in Germany. Foreign capital income earned before the move is subject to different rules and may fall under Progressionsvorbehalt (progression reservation, where foreign income affects the tax rate on German income). The Freistellungsauftrag can be set up at any point during the year — it applies to all capital income earned from the beginning of that year. If no FSA was set up, withheld tax can be recovered through a Steuererklarung (tax return) with Anlage KAP (capital income appendix).

My spouse has no income — can we get the EUR 2,000 on a single joint account?

Yes. For a Gemeinschaftskonto (joint account) or Gemeinschaftsdepot (joint securities account), both spouses submit a joint Freistellungsauftrag for EUR 2,000. The application requires both spouses' Steuer-ID (tax identification number) and both signatures. For individual accounts, each spouse manages their own EUR 1,000 across their personal accounts. Even if one spouse has no income at all, the combined EUR 2,000 allowance applies in full. The allowance amount does not depend on Steuerklasse (tax class). Combining joint and individual FSAs is permitted as long as the total does not exceed EUR 2,000 for the couple.

I forgot to set up the FSA — the bank withheld tax. How do I get it back?

To recover the overpayment, file a Steuererklarung (tax return) with Anlage KAP (capital income appendix). Declare your capital income, and the Finanzamt (tax office) will calculate that the first EUR 1,000 was exempt and process a refund of the overpaid tax. The bank issues a Jahressteuerbescheinigung (annual tax certificate) in Q1 of the following year containing all necessary data. The refund typically arrives within 2-4 months after filing. For future years: the FSA can be set up at any point during the year, and it applies to all capital income earned from the beginning of that year. Setup takes 2-5 minutes in the bank or broker online portal.

What happens if I accidentally exceed the total EUR 1,000 across all banks?

Banks report all FSA amounts to the Bundeszentralamt fur Steuern (BZSt, Federal Central Tax Office), which aggregates them. If the total exceeds EUR 1,000, BZSt notifies the Finanzamt (tax office). In practice: back-taxes on the excess amount at 26.375% will be owed. For first-time minor exceedances, the Finanzamt typically issues a correction (Steuerbescheid, tax assessment notice) rather than a fine. Intentional abuse carries fines of up to EUR 25,000 (Paragraph 50e EStG, Income Tax Act). To fix the situation: reduce the FSA at one or more banks immediately. The change takes effect for future income, not retroactively for the current year — previously exempted amounts will be recalculated when filing the Steuererklarung (tax return).

Sources

1. Einkommensteuergesetz (EStG) § 20 Abs. 9 — Sparer-Pauschbetrag, Bundesministerium der Justiz, https://www.gesetze-im-internet.de/estg/__20.html (legal establishment of €1,000/€2,000 exemption limit, effective since 2023)

2. Einkommensteuergesetz (EStG) § 43a — Bemessung der Kapitalertragsteuer, Bundesministerium der Justiz, https://www.gesetze-im-internet.de/estg/__43a.html (25% tax rate on capital income, plus 5.5% solidarity surcharge)

3. Bundeszentralamt für Steuern — Freistellungsaufträge und Nichtveranlagungsbescheinigungen, https://www.bzst.de/DE/Unternehmen/Kapitalertragsteuer/Freistellungsauftraege/freistellungsauftraege_node.html (monitoring for limit violations, penalties for infractions)