Withholding tax

the Withholding tax is a flat-rate capital gains tax of 25 %, which has been levied since 1 January 2009 on Interest chargesdividends and capital gains. It is withheld directly by banks and credit institutions and paid to the tax office. In addition, the Solidarity surcharge and if necessary Church tax an.

Legal basis: § Section 32d (1) of the Income Tax Act (EStG): "The income tax for income from capital assets [...] is 25 per cent."

Taxed investment income:

Interest from bank deposits, bonds and loans
Dividends from shares and funds
Capital gains from the sale of securities
Income from investment funds - regardless of distribution or reinvestment
Gains from certificates and reverse convertibles (with exceptions for old holdings)
Endowment insurance policies with payout before the end of 12 years or before the age of 60

Exceptions (not taxable):

Investment income in the context of commercial or freelance activities
Loans between related parties if the debtor claims business expenses
Interest income from shareholder loans with an interest of more than 10 %

Exemption order and non-assessment certificate:

Savings lump sum: 801 € for single persons / 1,602 € for married couples - to be deposited with the bank
NV certificate: To be applied for at the tax office - valid for 3 years if the income is below the basic tax-free allowance (e.g. € 8,652)

Assessment option - Annex KAP:

For capital gains that were wrongly taxed or for which the personal tax rate is below 25 %
Mandatory for: Foreign interest, sale of life insurance, refund interest from the tax office
Favourability test: Examination by the tax office as to whether the personal Tax rate is more favourable than the flat-rate withholding tax

Investment funds and special features:

New taxation rules for funds since 2018 with abolition of grandfathering
Partial exemptions apply to equity and mixed funds
For foreign accumulating funds: separate information required in Annex KAP

Advantages:

Simpler taxation through automatic payment by banks
Less administrative work for tax returns

Disadvantages:

No more deductions for income-related expenses possible
Losses on shares may only be offset against gains from share transactions

Example: You receive €1,200 in interest per year from three different banks, but only have exemption orders totalling €1,000 with two banks. The remaining €200 is subject to withholding tax - if your personal tax rate is below 25 %, you can use the KAP attachment apply for a refund.