Abgeltungsteuer — The Flat Tax on Investment Income
Since 2009, Germany applies a flat 25% withholding tax (Abgeltungsteuer) on Kapitalerträge — capital income from portfolio investments. Total effective rate: 26.375% (including solidarity surcharge).
- Dividends from listed and unlisted shares
- Interest from bonds and savings accounts
- Fund distributions and ETF gains
- Capital gains on share disposals (any holding period since 2009)
- NOT applicable: real estate gains (taxed as ordinary income if held < 10 years)
Individual vs Corporate Treatment
Tax treatment differs significantly depending on whether the investor is an individual or a company:
| Investor Type | Dividends | Share Sale Gains | Key Provision |
|---|---|---|---|
| German individual (< 10% stake) | 26.375% Abgeltungsteuer | 26.375% Abgeltungsteuer | Sparerpauschbetrag €1,000/yr exempt |
| German individual (≥ 25% stake or director) | Teileinkünfteverfahren: 60% taxable | 60% taxable at personal rate | Elective if >1% stake + director |
| German corporation (< 10% stake) | 26.375% on dividends | 26.375% on gains | No participation exemption |
| German corporation (≥ 10% stake) | 5% effective (§8b KStG) | 5% effective (§8b KStG) | 95% tax-exempt participation exemption |
The Sparerpauschbetrag (investor allowance) provides €1,000/year tax-free investment income per individual (€2,000 for jointly assessed couples). Submit a Freistellungsauftrag to your German bank to apply it at source automatically.
Corporate vs Individual Treatment
For substantial investments, a German GmbH holding structure is far more tax-efficient than personal holdings. Under §8b KStG, corporate shareholders receiving dividends or gains from ≥10% stakes pay only ~1.5% effective tax versus 26.375% for individuals.
Frequently Asked Questions
Does the 10-year rule apply to share gains in Germany?
No — the 10-year exemption applies only to real estate (Spekulationsfrist). Share gains have been subject to Abgeltungsteuer since 2009, regardless of holding period. Pre-2009 gains on shares held since before 2009 are generally grandfathered (steuerfrei).
What is the Abgeltungsteuer rate in Germany?
The flat rate is 25% plus 5.5% solidarity surcharge = 26.375% total. Church tax (Kirchensteuer) may apply additionally for registered church members (8–9%), raising the effective rate to ~27.8–27.9%.
Are crypto gains subject to Abgeltungsteuer in Germany?
No — crypto gains are taxed differently. Under §23 EStG, cryptocurrency held for more than 12 months is entirely tax-free for individuals. Crypto held less than 12 months is taxed as ordinary income (Einkommensteuer), not Abgeltungsteuer.
How does the §8b KStG participation exemption help German holding companies?
Under §8b KStG, a German GmbH receiving dividends or capital gains from a ≥10% stake in another company has 95% of that income exempt from both Körperschaftsteuer and Gewerbesteuer. The effective tax rate on group dividends is approximately 1.5% — making German holding structures highly efficient for group structuring.
Can I offset capital losses against capital gains in Germany?
Yes, but with restrictions. Losses from capital investments (Verlustverrechnungstopf) can only be offset against future capital income — not against ordinary income. Banks in Germany track loss pools automatically. Unused capital losses can be carried forward indefinitely.
How are ETF investments taxed in Germany?
Since the 2018 Investmentsteuerreform, German-domiciled ETFs pay 15% corporate tax on certain German income inside the fund. Investors benefit from a Teilfreistellung (partial exemption): 30% of gains from equity ETFs are tax-free, 15% for mixed funds, 60% for real estate funds. The remaining gains are taxed at 26.375% Abgeltungsteuer. An annual Vorabpauschale (advance lump sum) may apply to accumulating ETFs.
Is there a wealth tax in Germany?
Germany does not currently have a wealth tax (Vermögensteuer). The former Vermögensteuer was suspended by the Federal Constitutional Court ruling in 1995 as unconstitutional due to unequal treatment of different asset types. While periodic political discussions about reintroduction occur, no wealth tax currently applies to individuals or companies in Germany.
How is real estate capital gains tax different from Abgeltungsteuer in Germany?
Gains from selling real estate held for less than 10 years are taxed as ordinary income at the progressive personal income tax rate (up to 45%) under §23 EStG — not at the flat 26.375% Abgeltungsteuer rate. Real estate held for more than 10 years is entirely tax-free for individuals. Owner-occupied property is exempt from the 10-year rule if used personally in the 3 years before sale.
What is the Teileinkünfteverfahren and when does it apply?
The Teileinkünfteverfahren applies to dividends and share sale gains received by individuals who hold a stake of 1%+ in a GmbH and are employed by or direct the company (§32d(2) EStG). Under this method, 60% of the income is taxable at the personal income tax rate (up to 45%), rather than the flat 26.375% Abgeltungsteuer. It can be more or less advantageous depending on the individual's personal tax rate.
How does Germany tax foreign investment income for German residents?
German residents are taxed on worldwide income (unbeschränkte Steuerpflicht). Foreign dividends and share gains are subject to German Abgeltungsteuer at 26.375%. Foreign withholding taxes paid can be credited against German tax under §36 EStG or DTAs. For countries with German DTAs, the creditable amount is capped at the German rate. Income from countries without a DTA is taxed in full in Germany, potentially with a unilateral foreign tax credit under §34c EStG.
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