Withholding tax

The final withholding tax came into force in Germany on January 1, 2009. Whether capital gains, interest income or dividends: Investment income that exceeds the saver's lump sum of EUR 801 (or EUR 1000 from 2023) (married couples EUR 1602 or EUR 2000 from 2023) is taxed at a flat rate of 25% - plus solidarity surcharge and church tax, if applicable. The final withholding tax is withheld directly by the bank and paid to the tax office.

Most important innovations

• Uniform paying agent tax with settlement effect
• Tax rate is 25% plus 5.5% solidarity surcharge and, if applicable, corporation tax. Taking into account the creditable withholding tax, the flat-rate tax rate is:
  (income - 4*QSt)/(4+KiSt)
• Losses can no longer be offset against other types of income (e.g. from non-self-employed work)
• Increases in value are always taxable. Excluded are positions with grandfathering, i.e. positions generally acquired by December 31, 2008 (special regulation for certificates and financial innovations).
• Sales proceeds under grandfathering are tax-free
• Two independent (loss) offsetting pools are set up at the custodian bank for ordinary income and disposal results. A pot for share disposals and a pot for ordinary income and other disposals
• The total tax-free allowance until 2022 is EUR 801 for single people and EUR 1,602 for married couples (same amount as the previous tax-free allowance plus lump sum for income-related expenses)
• The tax-free allowance will increase to EUR 1,000 for single people and EUR 2,000 for married couples from 2023
• Income-related expenses will no longer be deductible in future, but transaction costs will still reduce the taxable profit (or increase the loss)
• The exemption limit of EUR 512 for capital gains from securities transactions was raised to EUR 600, but is hardly relevant anymore (foreign currency gains on currency accounts)
• If the personal tax rate is lower (than 25%), a tax refund is possible (as part of the income tax return)
• The church tax is usually withheld and paid by the bank
• Foreign currency gains on currency accounts fall under the 'old' §23
• The tax-relevant realized gain on foreign currency securities must be converted into euros on the respective purchase and sale date, not into the account currency
• No separate tax treatment of option writer transactions and premiums

Shares

Due to the abolition of the half-income method, the flat-rate withholding tax for dividend-bearing securities results in an additional burden with regard to distributions (and disposals).

Bonds

The same assessment basis applies to interest payments as before, so that the flat-rate withholding tax tends to have a positive effect on interest income (from January 1, 2009).

Fund

In the case of fund disposals, the one-year period for tax-free disposals can no longer be claimed. As with other types of securities except certificates, purchases up to December 31, 2008 are exempt (grandfathering). Gains on the sale of securities generated at fund level are tax-free for funds under grandfathering unless they are distributed, i.e. reinvested.

Certificates

For certificates acquired after March 14, 2007 (closing date), the option to sell them tax-free after one year ended on June 30, 2009 (also closing date).

Options

The option premiums received now also count as income from capital assets (note: if the opening and closing were not in the same tax year, the amounts are not offset). Otherwise, the net principle applies here - i.e. expenses and income are offset and the net profit or loss is taxable (there are no longer any different tax categories).

Forward exchange transactions/futures

The acquisition costs and sales proceeds - less transaction costs - are also subject to withholding tax.