How are investments and capital gains taxed in Germany?

Short answer: If you are tax-resident in Germany, investment income – including dividends, interest and many gains from stocks and ETFs – is generally taxed at 25% under the German capital income tax regime (Kapitalertragsteuer / Abgeltungsteuer), plus the solidarity surcharge and, where applicable, church tax. Tax allowances and special ETF rules can reduce the taxable amount.

What investment income is taxed in Germany? If you are tax-resident in Germany, taxable investment income can include dividends, interest, distributions from investment funds and capital gains when you sell shares or ETFs at a profit. This FAQ focuses on financial investments rather than gains from selling property.

How much capital gains tax do you pay? Private investment income is generally taxed at 25%. Germany also provides a tax-free savings allowance (Sparer-Pauschbetrag) of €1,000 per person or €2,000 for jointly assessed married couples. With a German bank or broker, you can usually submit a Freistellungsauftrag so this allowance is taken into account before tax is withheld.

How are ETFs taxed in Germany? ETFs can be taxed when they distribute income, when you sell them at a profit and, in some cases, through the annual advance lump sum (Vorabpauschale). Depending on the type of fund, part of the income may also be tax-exempt through a Teilfreistellung. For qualifying equity funds, for example, a 30% partial exemption can apply to private investors.

What if I use a foreign broker? German banks and brokers generally withhold applicable investment taxes automatically. A foreign broker may not do this. In that case, you may need to declare your investment income in your German tax return, often using Anlage KAP. Foreign withholding tax (Quellensteuer) may also need to be considered.

If you are unsure whether you need to file a return, see our FAQ on whether expats need to file a German tax return.

Key takeaways:

• Investment income is generally taxed at 25% under the German Kapitalertragsteuer / Abgeltungsteuer regime.
• The Sparer-Pauschbetrag is €1,000 per person or €2,000 for jointly assessed couples.
• ETFs can involve additional rules such as Vorabpauschale and Teilfreistellung.
• Foreign broker accounts may need to be reported through your German tax return.

Need help with investments, foreign income or your German tax return? Explore our tax services for expats.