Capital gains tax

Kapitalertragsteuer (capital gains tax, officially: Abgeltungsteuer, flat-rate withholding tax) taxes income from capital assets in Germany – i.e. interest, dividends and capital gains – at a flat rate.

The tax rate:

• 25% flat-rate withholding tax
• + 5.5% solidarity surcharge (on the 25%)
• + church tax if applicable (8–9%)
• Effective total rate: 26.375% (without church tax) to 27.995% (with church tax)

What is taxed?

• Interest: overnight money, fixed-term deposits, savings book
• Dividends: distributions from shares and funds
• Capital gains: profit when selling shares, ETFs, funds
• Vorabpauschale (advance lump sum): annual taxation of accumulating funds

Saver's allowance:

• €1,000 per person (€2,000 for married couples) tax-free
• Set up an exemption order with your bank!

Partial exemption for equity funds/ETFs:

• 30% of income is tax-free (equity funds with 51% shares)
• Effective tax rate: only ~18.5% instead of 26.375%

Final withholding: the tax is withheld directly by the bank – you don't have to take care of anything (apart from setting up the exemption order).