Proposals have been put forth by the Commission on the subject.
In Germany, individuals with accounts and brokerage accounts at banks or brokers can benefit from the saver's allowance, a tax-free allowance for capital gains amounting to €1,000 per person, and €2,000 for joint accounts of married couples. To make the most of this allowance, it's essential to apply for a capital gains tax exemption order.
What is a Capital Gains Tax Exemption Order?
This exemption order, issued by the bank or financial institution, instructs them to stop withholding the capital gains tax on your investment income up to the tax-free allowance. The purpose of this order is to avoid automatic tax deductions on capital income that fall within the tax-free allowance limit.
Applying for a Capital Gains Tax Exemption Order
The key steps to apply include requesting the capital gains tax exemption form from your bank or financial institution, providing your tax identification number, filling out and submitting the form, and submitting separate orders for each bank or investment account to avoid withholding.
The Importance of the Capital Gains Tax Exemption Order
Without this exemption order, your bank is legally required to withhold 25% tax plus a solidarity surcharge on your capital gains before payment. If you do not submit the exemption order, you may still recover overpaid tax later by filing a tax return, but this adds administrative steps.
Validity and Renewal of the Exemption Order
The exemption order is valid from January 1 of the year in which it was submitted and is valid indefinitely, unless an end date is specified on the form. If you have forgotten to issue the capital gains tax exemption order, you can reclaim the withholding tax paid directly to the tax office via your income tax return.
Special Cases
Low-income earners, such as students, students, or pensioners, can exempt their capital gains from withholding tax with a Non-Assessment Certificate, provided their income does not exceed the valid basic allowance of €12,096 for 2025 and €11,784 for 2024.
For foreign residents or other specific capital income tax relief, applications or certificates may need to be submitted electronically through the Federal Central Tax Office portal.
With Foreign Banks and Brokers
Individuals with accounts at foreign banks and brokers will receive an annual certificate, which can be used to report their capital gains in their tax return and claim their allowance.
Remember, it's crucial to check if your capital gains tax exemption order is still valid or if you need to set up a new one. The Freistellungsauftrag for capital gains is the responsibility of the investor and is not automatically issued when opening an account. It is recommended to fill out and submit a Freistellungsauftrag in parallel with every account opening.
For more information and to access a current sample form for the capital gains tax exemption order, visit the German Federal Financial Supervisory Authority's website.
- What if you're interested in personal-finance matters, specifically investing in the German market? You might want to consider the benefits of a Capital Gains Tax Exemption Order.
- To maximize your personal-finance gains while investing, it's crucial to understand the importance of a Capital Gains Tax Exemption Order. This allows you to avoid automatic tax deductions on capital income within the tax-free allowance limit.
