Everything You Need to Know About the Withholding Tax

1. Introduction

Since 2009, withholding tax has been levied on capital gains in Germany, with the aim of taxing capital income at a flat rate of 25%. This was intended not only to simplify the taxation process of capital income but also to strengthen the capital share in tax revenue.

2. Capital Gains Subject to Withholding Tax

All income from private capital assets, such as interest, dividends, distributions from fund investments, futures transaction income, and profits from the sale of securities, are subject to withholding tax.

3. Temporal Scope of Application

There is a grandfather clause for the sale of securities acquired before 2009. For capital gains after 2009, the withholding tax applies.

4. Amount of Withholding Tax

The tax rate is uniformly 25% plus a 5.5% solidarity surcharge. For church members, the total burden can be up to 27.99%.

5. Offsetting Losses Against Gains

Losses from securities and futures transactions can be offset for tax purposes indefinitely and in full. The bank automatically maintains two loss offset pots for shares and other losses.

6. Securities Transfers Between Banks

There are differences between securities transfers without and with a change of creditor, whether for consideration or gratuitously. In the case of a securities transfer with a change of creditor, the withholding tax becomes due.

7. Deductible Costs

Costs such as custody or management fees can be covered by the saver’s lump sum. Advertising expenses are only deductible under certain circumstances.

8. Assessment for Income Tax Despite Withholding Tax

In some cases, an assessment for income tax may be necessary despite withholding tax, e.g., for foreign capital gains or for a favorable assessment if the individual tax rate is below 25%.

These are the most important pieces of information about withholding tax in Germany. It is advisable to consult a tax advisor or tax firm for complex tax matters to find optimal solutions.