If you live and invest in Germany, you’ll eventually come across capital gains tax. For many foreigners, expats, and international professionals, the German tax system can seem confusing at first.
Do you have to report your stock market gains yourself? How are ETFs taxed? What is the advance lump-sum tax (Vorabpauschale)? And does it matter whether you use a German or a foreign broker?
The most important rule is simple:
If you are a tax resident of Germany, you generally pay German tax on your worldwide investment income. This includes dividends, interest, realized capital gains from shares, and profits from ETFs.
1. What Is Capital Gains Tax in Germany?
Capital gains tax is the German tax on income from investments (Kapitalvermögen). This includes, in particular:
- capital gains from selling shares,
- dividends,
- ETF distributions,
- profits from selling ETFs,
- interest income,
- and certain investment fund earnings.
For private investors, Germany applies a flat withholding tax (Abgeltungsteuer) of 25% on taxable investment income.
In addition, a Solidarity Surcharge (Solidaritätszuschlag) of 5.5% of the tax amount is charged. Without church tax, this results in an effective tax rate of 26.375%, which is also the rate quoted by the German Federal Ministry of Finance.
If you are liable for church tax, your effective tax burden usually increases to around 27.8%–28.0%, depending on the federal state in which you live.
2. Who Has to Pay Capital Gains Tax in Germany?
Your tax residency, not your nationality, is what matters.
If you live in Germany or have your habitual residence there, you are generally considered fully liable for German income tax. This means Germany taxes your worldwide income, including investment income held in foreign brokerage accounts.
This is particularly important for expats.
Even if your investment account remains in the United States, the United Kingdom, India, France, Spain, or another country, the income generated by that account may still be taxable in Germany.
3. How Are Stock Gains Taxed?
For shares, the taxable event is generally the realized capital gain.
As long as you continue to hold a stock and its value increases, no tax is due on the unrealized gain. Tax is normally triggered only when you sell the shares.
Example
You buy shares for €5,000.
Later, you sell them for €8,000.
Your capital gain is €3,000.
In principle, capital gains tax applies to this €3,000 profit, not to the full sale price.
Dividends are treated differently. They become taxable as soon as they are paid out. This means you can generate taxable investment income simply by holding dividend-paying stocks, even if you never sell them.
4. How Are ETFs Taxed?
ETFs are taxed under rules similar to those for investment funds.
The following events may be taxable:
- distributions,
- capital gains when selling ETF units,
- and, for accumulating ETFs, the so-called advance lump-sum tax (Vorabpauschale).
A distributing ETF pays investment income directly to investors. These distributions are generally taxable.
An accumulating ETF automatically reinvests its earnings instead of distributing them. To ensure a minimum level of annual taxation, Germany applies the Vorabpauschale.
For 2026, the German Federal Ministry of Finance has set the base interest rate used to calculate the advance lump-sum tax at 3.20%.
For tax purposes, the 2026 advance lump-sum amount is deemed to be received on 4 January 2027.
Important: The advance lump-sum tax is not an additional penalty tax. It is taken into account when you eventually sell your ETF, helping to prevent the same income from being taxed twice.
5. Partial Tax Exemption for Equity ETFs
One of the major tax advantages of many equity ETFs is the partial tax exemption (Teilfreistellung).
Equity funds and equity ETFs that meet certain equity-investment requirements benefit from a tax exemption on part of their returns.
For many standard equity ETFs, 30% of the income is tax-exempt, meaning that only 70% is subject to capital gains tax.
Example
You earn €1,000 from an equity ETF.
With a 30% partial exemption:
- €300 is tax-free.
- Only €700 is taxable.
As a result, equity ETFs are often slightly more tax-efficient than individual shares, which generally do not qualify for this exemption for private investors.
6. The Saver’s Allowance (Sparer-Pauschbetrag)
Every tax resident in Germany is entitled to a tax-free allowance for investment income, known as the Saver’s Allowance.
The current annual allowance is:
- €1,000 for single taxpayers.
- €2,000 for married couples or registered civil partners filing jointly.
Investment income up to these limits is exempt from capital gains tax.
The German Federal Ministry of Finance also confirms the €1,000 annual allowance for single taxpayers.
If you use a German broker, you can submit an exemption order (Freistellungsauftrag). The broker will then refrain from withholding tax until your allowance has been fully used.
Foreign brokers generally do not offer this option. Instead, you claim the allowance when filing your German income tax return.
7. German Broker vs. Foreign Broker
For expats, this is one of the most important practical differences.
If you invest through a German broker, such as:
- Trade Republic,
- Scalable Capital,
- comdirect,
- ING,
- or Consorsbank,
capital gains tax is often withheld automatically and paid directly to the German tax authorities.
This makes tax compliance much easier, as you usually do not have to calculate your investment taxes yourself.
With a foreign broker, such as:
- Interactive Brokers,
- DEGIRO,
- eToro,
- Swissquote,
- or a brokerage account in your home country,
German taxes are often not withheld automatically.
In that case, you generally need to report your investment income yourself in your German income tax return.
This is not necessarily disadvantageous, it simply requires more administrative work.
8. Do You Need to File a Tax Return?
If you invest only through a German broker that has correctly withheld all applicable taxes, you often do not need to report those investment earnings separately.
However, filing a tax return may be required or beneficial if you:
- use a foreign broker,
- receive foreign dividends,
- want to claim a credit for foreign withholding tax,
- wish to offset investment losses,
- have not submitted a sufficient exemption order,
- have a personal income tax rate below 25%,
- or need to correct tax errors.
If your investment income has not already been taxed automatically in Germany, it should generally be reported in Appendix KAP (Anlage KAP) of your German income tax return.
9. Offsetting Investment Losses
Investment losses can have tax consequences.
As a general rule, losses from investment income may only be offset against other investment income. German tax law contains specific rules governing how losses can be used.
One important distinction is:
- Losses from selling shares can generally only be offset against gains from selling other shares.
- Losses from ETFs can typically be offset against other types of taxable investment income.
German brokers often handle these calculations automatically within the same brokerage account.
If you use multiple brokers, you may need a loss certificate (Verlustbescheinigung) to offset losses across different accounts.
10. Foreign Withholding Tax
Many expats invest in international shares or ETFs.
As a result, foreign withholding tax may apply, for example, to dividends paid by U.S. companies.
Example
A U.S. company pays you a dividend.
The United States withholds tax at source.
Germany also taxes the dividend, but under certain conditions, part or all of the foreign withholding tax can be credited against your German tax liability.
For U.S. securities, the W-8BEN form is particularly important.
For many private investors who are tax residents of Germany, it reduces U.S. withholding tax on dividends to 15%.
For ETFs, the applicable withholding tax often depends on where the fund is domiciled, such as Ireland or Luxembourg.
11. Common Mistakes Made by Expats
Many international investors make the same mistakes:
- They believe that only German brokerage accounts are taxable. This is incorrect. German tax residents are generally taxed on investment income from foreign accounts as well.
- They assume unrealized gains are always taxable. For individual shares, tax is usually due only when the shares are sold. However, accumulating ETFs may also be subject to the advance lump-sum tax.
- They forget to report foreign dividends.
- They use a foreign broker and assume that tax has already been paid somewhere else.
- They fail to submit an exemption order to their German broker.
- They do not keep proper records of purchase prices, sales, and currency conversions.
12. Practical Example
An expat professional has been living in Berlin since 2024 and invests through a German broker.
During 2026, they receive:
- €400 in stock dividends,
- €600 in realized gains from selling shares,
- €1,000 in gains from an equity ETF.
Their total investment income amounts to €2,000.
Assuming the ETF qualifies for the 30% partial tax exemption, only €700 of the ETF gain is taxable.
Taxable investment income
- €400 dividends
- €600 stock gains
- €700 taxable ETF gains
Total taxable investment income: €1,700
The annual Saver’s Allowance of €1,000 is then deducted.
Remaining taxable investment income: €700
Capital gains tax and the Solidarity Surcharge are then calculated on this remaining €700
Disclaimer: No Legal or Tax Advice
The information provided in this article is for general informational purposes only. It is intended to offer an easy-to-understand overview of how stocks and ETF investments are taxed in Germany. It does not constitute legal, tax, or financial advice and should not be considered a substitute for professional advice from a qualified tax advisor, attorney, or other financial professional.
Whether capital gains tax applies and how much tax is due always depends on your individual circumstances. This is particularly important for expats, international professionals, and individuals who earn investment income or hold brokerage accounts in more than one country. In such cases, additional tax rules, double taxation treaties, or reporting obligations may apply.
While every effort has been made to ensure that the information in this article is accurate and up to date, no guarantee can be given regarding its accuracy, completeness, or current validity. German tax laws may change over time, and their interpretation may vary depending on the tax authorities or the courts.
If you are unsure how German tax rules apply to your personal situation, you should seek advice from a qualified German tax advisor (Steuerberater) or a lawyer specializing in German tax law..
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