Please note that we only withhold tax for customers which are tax based in Germany.
In January 2009, the German government introduced a general allowance for income from capital gain (§ 20 EStG). The law includes a variety of special cases. Please note that the following information is therefore meant only to give a general overview of the changes from January 1st 2009.
In Germany, the withholding tax on capital gains is retained directly through the credit institutes and transferred anonymously. The tax concerns capital investments such as interest income, dividends and capital gains on securities including stocks as well as e.g. fund units, bonds, subscription warrants or financial innovations.
The tax is calculated over a fixed capital gains tax of 25 % that is independent of the creditor’s personal income tax rate plus solidarity surcharge (5.5 % of the withholding tax) and, where applicable, church tax (8 or 9 % of the withholding tax). Banks, savings banks and financial institutes will in the future directly retain 25 % of the total capital gains for the tax authorities. With this, the income tax for capital gains is on principle deemed for private investors, which represents the key difference to capital income tax without the withholding tax. The assessment is based on the gross earnings, which are reduced only by the saver’s flat-rate amount (= saver’s tax exempt and professional expenses tax exempt amount taken together). Further tax exempts from professional expenses are not possible. For company investors, the tax deduction is not yet considered to be deemed meaning that the income tax return will still have to include these incomes.
Many EU member states have introduced a withholding tax system for capital gains. However, these systems often only consider interest and dividends. Some countries, including Germany, also make the value increase of the capital gains subject to the withholding tax.
The withholding tax regulation generally concerns all income from capital gains, especially interest from deposits in credit institutes, capital gains from debt securities, dividends, income from investment funds or futures, business with CFDs and any income from certificates. Moreover, the withholding tax considers gains from private disposal, especially securities, investment shares and holdings in incorporated companies (real-estate is excluded) as well as covered call positions and all other income from securities and derivates. Currency transactions and derivates with physical delivery of currencies in the moment of execution are excluded. This means that also those gains that had previously been taxed only in the scope of speculative transactions are now for the first time also considered when a holding period of more than one year is exceeded.
Income from investment in the asset “currency” (e.g. capital gains from foreign exchange on foreign currency accounts) continue to be taxable pursuant to § 23 EStG as private sale transactions and must be included in the annual income tax return. In contrast, the declaration of these incomes in the annual tax certificate is no longer necessary as the banks have been freed from their previous legal obligation. Voluntary certificates may be available through individual banks but are not always free of charge.
Which selling transactions are taxable was set out anew in § 20 para. 2 EStG. Taxable are:
- Sales related to shareholding (stock or capital share),
- Sale of coupons (dividend or interest) without voting right,
- Profits related to trading futures (if a physical delivery of the currency takes place in course of the execution, the transaction is not subject to a withholding tax through the bank - § 23 for private sales transactions is applicable here)
- Sale of shares related to silent partnership or profit participation
- Transfer of rights of mortgages or pensions
- Profits related to capital life insurance and
- Sale of other capital claims pursuant to § 20 para. 1 no. 7 EStG or of a legal position pursuant to § 20 para. 1 no. 9 EStG
Besides the selling of transactions, the redemption of capital claims is also taxable (upon final maturity).
Income gained from foreign investments is also subject to the withholding tax. However, since Germany has closed double taxation treatise with many states, the situation often varies from country to country as an additional withholding tax may come to bear, which will then be allowable in part or in total. In general, the withholding tax is not charged in the foreign country. Taxable persons must declare the income with the tax authorities in their country of origin.