Capital Gains Tax in Germany (Abgeltungsteuer) — 2026 Guide

Abgeltungsteuer — The Flat Tax on Investment Income

Since 1 January 2009, Germany applies a flat 25% withholding tax called Abgeltungsteuer on Kapitalerträge — capital income from portfolio investments. The legal basis is §32d EStG. The total effective rate is 26.375% including the 5.5% Solidaritätszuschlag. Church members additionally pay Kirchensteuer of 8–9% on the income tax component, raising the effective rate to approximately 27.8–27.9%. Abgeltungsteuer is withheld at source by German banks and securities custodians (Depotbanken) before the investor receives any payment. For German residents holding investments through German brokers, the tax is generally final — there is no need to include the investment income in the annual Einkommensteuererklärung unless seeking a more favourable treatment.

• Dividends from listed and unlisted German and foreign shares
• Interest from bonds, savings accounts, call money (Tagesgeld), and fixed deposits
• Fund distributions and capital gains on ETF and mutual fund units
• Capital gains on share disposals — all holding periods subject since 1 January 2009
• Structured product returns and zero-coupon bond accruals
• NOT applicable: real estate gains (taxed as ordinary income if held <10 years under §23 EStG)

Individual vs Corporate Treatment — Key Differences

Tax treatment of capital gains and dividends differs dramatically depending on whether the investor is an individual or a company. For individuals with small portfolio holdings, the flat 26.375% Abgeltungsteuer applies. For corporate shareholders with ≥10% stakes, the §8b KStG participation exemption reduces the effective tax to approximately 1.5%. This difference drives the widespread use of German GmbH holding structures among founders and investors.

The Sparerpauschbetrag and Freistellungsauftrag

Every German resident individual is entitled to a Sparerpauschbetrag (savers' allowance) of €1,000 per year (€2,000 for jointly assessed married couples) under §20(9) EStG. This amount of investment income is completely free of Abgeltungsteuer each year. To use this allowance through a German bank or broker, the investor must submit a Freistellungsauftrag — an exemption order that instructs the institution not to withhold tax on the first €1,000 of annual capital income. The Freistellungsauftrag can be split across multiple German institutions. Any unused allowance from one tax year cannot be carried forward to the next — it lapses annually. Investors who do not submit a Freistellungsauftrag have the full 26.375% withheld and must reclaim the excess via their Einkommensteuererklärung.

• €1,000 Sparerpauschbetrag per individual per year — all investment income below this amount is tax-free
• €2,000 for jointly assessed married couples filing Zusammenveranlagung
• Freistellungsauftrag must be submitted to each bank/broker in writing — applies to current and future years until revoked
• Total Freistellungsaufträge across all institutions cannot exceed the €1,000/€2,000 limit
• Annual allowance lapses — unused amounts cannot be carried to following years
• Günstigerprüfung: if personal income tax rate is below 25%, the lower rate applies via annual tax return under §32d(6) EStG

Cryptocurrency and Alternative Asset Taxation

Cryptocurrency held by German individuals is taxed fundamentally differently from shares and bonds — it is expressly excluded from Abgeltungsteuer and taxed under §23 EStG as a private disposal transaction (privates Veräußerungsgeschäft). Crypto held for more than 12 months is entirely tax-free for individuals in Germany — a uniquely favourable treatment compared to most EU countries. Crypto held for less than 12 months is taxed at the individual's personal income tax rate (up to 45% Reichensteuer), not the flat 26.375%. The €600 annual exemption for §23 EStG private disposal gains applies: if total gains from all §23 transactions in a year are below €600, they are tax-free.

• Crypto held >12 months: completely tax-free for German individuals under §23(1)(2) EStG
• Crypto held <12 months: taxed at personal income tax rate (14%–45%) — NOT Abgeltungsteuer
• €600 annual exemption: if all §23 EStG gains in a year are below €600, they are tax-free
• FIFO method standard for cost basis calculation of crypto disposals
• Staking rewards and DeFi income: treated as ordinary income when received (Sonstige Einkünfte)
• NFTs: treated as §23 EStG private disposal — same 12-month holding period rule applies

ETF and Fund Investment Taxation — Investmentsteuerreform

Since the 2018 Investmentsteuerreform (InvStG), the German taxation of investment funds was significantly restructured. German-domiciled funds pay 15% corporate tax on certain German-source income inside the fund. Investors benefit from a Teilfreistellung (partial exemption) that reduces the taxable gain based on fund type: equity funds 30% exempt, mixed funds 15% exempt, real estate funds 60% exempt. The remaining portion of gains is subject to 26.375% Abgeltungsteuer. Accumulating ETFs are subject to an annual Vorabpauschale (advance lump sum charge) — a notional gain designed to prevent indefinite tax deferral on unrealised growth. The Vorabpauschale is calculated using the Basiszins published by the Bundesbank and is withheld by custodian banks automatically.

• Equity ETFs: 30% Teilfreistellung — only 70% of gains subject to 26.375% Abgeltungsteuer
• Mixed funds (min 25% equity): 15% Teilfreistellung
• Real estate funds (min 51% real estate): 60% Teilfreistellung
• Vorabpauschale: annual notional taxation of accumulating ETF gains — withheld by German bank automatically
• Basiszins for Vorabpauschale: published annually by Deutsche Bundesbank; in 2024 was 2.29%
• Net effective Abgeltungsteuer on equity ETF gains: ~18.46% (26.375% × 70%)

Real Estate Capital Gains — Different Rules from Abgeltungsteuer

Capital gains from selling German real estate are not subject to Abgeltungsteuer. Instead they are taxed under §23 EStG as private disposal income at the full progressive personal income tax rate (up to 45%). The critical rule is the Spekulationsfrist (speculation period): real estate held for more than 10 years is completely tax-free on sale for individuals. Real estate held for less than 10 years is taxable at the full personal rate. Owner-occupied property (eigengenutzte Immobilien) is tax-free on sale if the owner lived in it for the year of sale and the two preceding years — the 10-year holding period does not apply. Inherited real estate: the deceased's acquisition date carries through to the heir for the 10-year calculation.

• Spekulationsfrist: real estate held >10 years is completely tax-free for individuals
• Held <10 years: gains taxed at personal income tax rate (up to 45%) — not flat 26.375%
• Owner-occupied property: tax-free if used personally in year of sale and 2 preceding years
• Depreciation recapture: AfA (Absetzung für Abnutzung) deducted during ownership reduces cost basis on sale
• Inherited property: heir takes over deceased's original acquisition date for 10-year calculation
• Corporate-held real estate: GmbH property gains always taxable at corporate rate with no 10-year exemption

Capital Loss Offsetting Rules

Capital losses in Germany can only be offset against capital gains — not against ordinary income. German banks maintain separate Verlustverrechnungstöpfe (loss compensation pools) for each investor account. Losses from share disposals (Aktientopf) can only offset gains from share disposals. General capital losses (allgemeiner Verlustverrechnungstopf) can offset other capital income. Unused losses are automatically carried forward to subsequent years by the bank. At year-end, investors can request a Verlustbescheinigung from their bank to transfer unused losses to a different bank or to claim them in the annual Einkommensteuererklärung. Losses from German institutions cannot automatically offset gains at foreign brokers.

• Capital losses can only offset capital gains — no offset against employment or business income
• Separate Verlustverrechnungstopf for Aktien (shares) vs general capital income
• Aktientopf: share disposal losses can only offset share disposal gains
• Allgemeiner Topf: other capital losses offset dividends, interest, and non-share disposal gains
• Annual Verlustbescheinigung: request by 15 December from each bank to consolidate losses in tax return
• Losses carry forward indefinitely — no time limit on using accumulated capital loss pools

Corporate Holding Structures for Capital Gains Efficiency

For investors and founders with significant investment portfolios or company stakes, a German GmbH holding structure can dramatically reduce the effective tax rate on dividends and capital gains. While an individual pays 26.375% Abgeltungsteuer on portfolio income, a GmbH holding company receiving dividends or selling stakes of ≥10% pays only approximately 1.5% effective tax under §8b KStG. The GmbH then retains the after-tax income for reinvestment. A key planning consideration: the Teileinkünfteverfahren under §32d(2) EStG applies when an individual holds ≥1% of a GmbH and is employed or acts as director — in this case, 60% of dividends are taxed at the personal rate, which may be better or worse than 26.375% depending on the marginal rate.

• GmbH holding receives dividends at ~1.5% effective tax (§8b KStG) vs 26.375% for individuals
• Capital gains on GmbH stake disposals by the GmbH holding: also ~1.5% effective tax
• Minimum 10% shareholding required for §8b KStG exemption — lower holdings fully taxed
• Teileinkünfteverfahren: if individual holds ≥1% + is director, 60% of dividend taxable at personal rate
• GmbH retained earnings grow at ~1.5% tax — far more efficient for wealth compounding vs personal holding
• Exit: eventually withdrawing funds from GmbH via dividend incurs 26.375% WHT at that stage