A detailed guide for expats on taxes on stocks in Germany. Learn about capital gains taxes on investment, minimum amount for tax exemption and
Taxes: One of the certainties of life, and especially in Germany. As an expat in Germany, you are required by law to pay taxes on the income you earn.
If you are an expat who is investing in Germany, you will have to pay taxes on the gains you receive from your investments. This article will take you through all the burning questions you might have:
When do you pay in taxes?
On what kind of investments do you have to pay the taxes?
All of that coming right up in this article!
Let’s cover up some basics first:
Taxes on Stocks in Germany: The Essentials
So, as an Investor in Germany you might be wondering what taxes you have to pay. Savers who invest money in the form of bank deposits, stocks, bonds, funds or certificates have to pay a Withholding Tax (Abgeltungssteuer).
- Since the year 2009, financial institutions in Germany have withheld 25 percent taxes on interests, dividends, and realized capital gains.
- In addition to this 25% tax, there is Solidarity Surcharge of 5.5% taking the total percentage to 26.375%.
- There is a voluntary Church tax (anywhere from 8%-9%) if you are registered for it.
Are all my gains from Stocks taxed?
NO! There is a tax-free allowance on capital gains which is up to 801€ for singles and 1602€ for couples. Your taxable amount will be whatever you earn exceeding the 801 Euros / 1602 Euros limit accordingly.
How to figure out my Taxable amount?
This is quite simple. For instance, let us say you buy a Stock XYZ at 120 Euros. You then sell the stock XYZ at 200 Euros. In this transaction, the amount you have gained is 80 Euros.
Furthermore, let us also assume that the Stock XYZ has also been paying you dividends of 1 Euro. In this case, the total taxable amount for you would be 80 Euros + 1 Euro, bringing the total to 81 Euros. And as long as your total taxable income is under the Saver lumpsum limit, you do not have to pay taxes on this gain.
When do I have to pay Taxes on Stocks in Germany?
You only pay taxes when you ‘realise’ a profit or loss: that means when you SELL a stock / position. A loss reduces your taxable income and when you make profit you have to pay the 26.375% of the PROFIT and not the entire amount! It’s a very important difference that many people completely ignore.
Are there any other exemptions for taxes on stocks in Germany?
Yes, in fact there is a significant exemption for taxes on stocks in Germany. You can sell old stock profits tax-free. But this may not be relevant if you are a new investor. As the Withholding tax system was only introduced on January 1, 2009 there is a special feature in place for all stocks that were bought up to the end of 2008. You are able to sell these tax free even today.
(If you are reading this right now to learn how the taxes work in Germany, this doesn’t apply to you of course. You are a bit too late!)
For instance, let us say you bought 10 shares of XYZ in 2007, and 10 more shares of XYZ in 2015. Now in 2021, you want to sell 15 Shares. In this case, the first in, first out principle . Out of the 15 shares you wish to sell, you can sell 10 without taxes. Only gains from 5 shares are taxable.
Do I have to file a Tax Declaration at the end of the year?
Here is the fun thing about using German brokers like the one I use, Scalable Capital: The taxes are already withheld and transferred to the respective Finanzamt whenever you sell a position / stock so that you don’t have to worry about manually filing your taxes yourself!
They also give you a ‘Steuerbescheinigung’ or a Tax Certificate of each financial year which you can show the Finanzamt if they ask for specific transactions.
Want to see mine? Here is my Tax certificate from Scalable Capital from the previous financial year:
Now, if you are an active investor like me, you need to keep things organised.
This is why I suggest all investors to use a German broker. I have opened my depot with Scalable Capital, and have been maintaining a 100k€ + portfolio with ease. Another great advantage you have by opening your depot with a German broker is that you don’t have to sit down and calculate taxes on your capital gains every year. The broker takes care of this and sends the withheld tax amount to the respective Finanzamt accordingly! How convenient is that?
You can open your completely free depot at Scalable Capital by using the link below:
Want to see a step by step tutorial on how to open your Depot with Scalable Capital?
if you are more into blog posts, then you can read the super simple step by step process of opening your depot with scalable capital here!
If you would like to watch a step by step video, then you can watch this video that I previously:
So this is it! We have covered up the very basics you need to understand about taxes on stocks in Germany. If you are an expat who is planning to invest in Germany, it is important that you learn fully about taxes and make investment decisions wisely.
Do you prefer to watch a more detailed video about taxes in Germany? Check out this video on the Brandevise Youtube channel!
what about the taxes on income?
We will write another blog post on it.
Very informative Bharat. Thanks for providing such valuable information. It’s great that one can easily pay Tax automatically. The calculation of Capital gains Tax becomes messy and scalable Capital is doing a great Job. Kudos!!!
Thank you so much Sherwyn! You are correct! Sitting down with all of the trades that you have made at the end of the year and start calculating taxes is a pain! That’s why Scalable Capital already takes care of it for you and you don’t have to do anything at all. I am using it myself so far and it is nice!
Incase company discounted stocks, there is an income tax during purchase for the difference between the discounted price and date value. How will the tax be calculated then at time of sell?
Thanks for the info! Can the losses and gains from both Stocks and ETFs be bundled together? Or are they treated separately?
Even though I use mostly Trade Republic now, unfortunately I also have investments with Revolut (country-agnostic), and I have to calculate some things myself.
Thank you for all your hard work, Bharat(and to your team). Your videos and information here are really great help for expats in Germany. I have followed your referral link for Scalable Capital, but however I am currently in doubts if it better to open side business in Germany (as I am already an employeed) and use that account for trading(I might be planning some day trading too), or I can use my personal bank account as better solution?
Thanks a lot for the great helpful info as always. Keep it up! One stop place for anything about Germany.
Thanks for the info given in this article, should give a try to scalable capital. One question I have on the article is about dividends. Using platforms like Revolut or Degiro, when I get dividends these look like they are already taxed (there is always a negative amount associated to the dividend. This means they should not be accounted when doing the tax declaration right?
What about acquiring equity in a company upon employment? Would this equity be taxed immediately or only when it’s sold at a later point in time?
Does Scalable still deduct taxes if your capital gain is less than 800 in the year?
Thanks for the explanation. When you sell with a profit, taxes are withheld by the broker and that paid directly to the Government. What happens when you sell with a loss? How can you claim this as a tax deductible? And if the total profit is below the tax fee allowance, how do you get it back if the broker withholds it at the source?
Very informative for the new comers into Germany. Do you have any information about how to file taxes using Elster?
What about gains from equity stock from the employer.
I read on several places that for this also social contributions and tax of up to 45% is realised??
It was an informative and nice illustration. From this explanation, I found out that I don’t need to pay tex since my profit from the closed crypto and stock positions is below 801 Euros as a single person for the year 2021.
If I’m employed in Germany, and I decided to invest in the stock market. In that case, do the taxes accumulate on both income and investment gains? In other words, do taxes get calculated separately for both income sources?
First of all a very nice and informative article.
I have one query, so now I start using scalable; if suppose my gain for year is greater then 831 euro but scalable will deduct tax on 831 euro flat as well; so do I have to file return to get my withholding taxes back from finanzmart?
Hey suppose I sold my shares and got a profit of 18 euros (Market evaluation) but then I actually received 15 euros as 3 euros were taxed why is that ? If the limit of taxation is roughly around 800 euros for singles .
thanks for the explanation.
I would like to ask about the limit for capital losses that can be used as an offset against the gains in one financial year?