Kapitalertragsteuer, literally translated as “capital gains tax” in English, is a tax levied on income generated from capital investments in Germany. This includes profits from stocks, bonds, and other financial investments.
What is “Kapitalertragsteuer”?
Kapitalertragsteuer is a form of income tax that applies to capital gains in Germany. It is a flat tax of 25% on all investment income above €801 for single individuals and €1,602 for married couples, per year. This tax is applicable to profits, interests, and dividends from stocks, ETFs, and other financial investments, excluding cryptocurrencies. In addition to the Kapitalertragsteuer, investors also pay a solidarity tax (SolidaritätszuschlagThe Solidaritätszuschlag, or "solidarity surcharge" in English, is a tax levied in Germany on top of the income and corporate... More) and, if applicable, church tax (KirchensteuerKirchensteuer, or church tax, is a unique financial obligation in Germany, translating literally to "church tax" in English. What is... More) on their investment income[4].
More information about “Kapitalertragsteuer”
Introduced in 2009, the Kapitalertragsteuer simplified the taxation of capital gains by establishing a uniform tax rate. This reform aimed to make the tax system more transparent and reduce the administrative burden for investors. The tax is withheld at the source, meaning that banks and financial institutions automatically deduct it before distributing the returns to investors. However, there are exemptions and opportunities for investors to reduce their tax liability, such as the use of a tax allowance (Sparer-Pauschbetrag) and the possibility to offset losses against gains[4][5].
Related to “Kapitalertragsteuer”
Here are some additional terms that are related to Kapitalertragsteuer:
- Abgeltungsteuer: A synonym for Kapitalertragsteuer, emphasizing the tax’s nature as a final withholding tax on capital income[16].
- SolidaritätszuschlagThe Solidaritätszuschlag, or "solidarity surcharge" in English, is a tax levied in Germany on top of the income and corporate... More: A solidarity surcharge that is an additional tax levied on top of the Kapitalertragsteuer[4].
- Sparer-Pauschbetrag: A tax-free allowance for capital gains, set at €801 for single individuals and €1,602 for married couples[4].
- Freistellungsauftrag: An exemption order that investors can file with their bank to apply the Sparer-Pauschbetrag and avoid unnecessary taxation of their capital gains up to the allowance limit[7].
Understanding Kapitalertragsteuer and its related concepts is crucial for investors in Germany to optimize their tax liabilities and make informed investment decisions.