Abgeltungsteuer and the solidarity surcharge
Germany taxes investment income — capital gains, dividends and interest — under the Abgeltungsteuer, a flat withholding tax of 25%, rather than at your personal income-tax rate. On top sits the solidarity surcharge (Soli) at 5.5% of the tax, which brings the effective rate to about 26.375%. The 2021 Soli reform that exempted most wage earners does not exempt capital-income withholding, and the Federal Constitutional Court upheld the Soli in 2025. If you are a church member, church tax of 8% (Bavaria and Baden-Württemberg) or 9% (elsewhere) applies to the tax as well; the reduction is built into the withholding, giving a combined rate around 27.8–27.99%.
For both the 2025 and 2026 tax years the headline 25% Abgeltungsteuer is unchanged. Your bank or broker normally withholds it at source and pays it to the Finanzamt, so many investors never file for it — but you must file an Anlage KAP if you want to claim unused allowance, use a broker abroad, or reconcile withholding across accounts.
The Sparer-Pauschbetrag (saver's allowance)
Every taxpayer has a tax-free Sparer-Pauschbetrag of €1,000 per year, or €2,000 for a jointly assessed couple, unchanged for 2025 and 2026. Investment income up to this amount is free of Abgeltungsteuer. You normally claim it by filing a Freistellungsauftrag (exemption order) with each bank or broker, splitting the allowance across them. If you don't, tax is withheld and you reclaim the allowance later through Anlage KAP.
The Vorabpauschale, explained in English
The Vorabpauschale ("advance lump sum") is the part of German fund taxation that confuses almost every non-German investor. Here is what it actually is.
When you hold a distributing fund, Germany taxes the dividends as they are paid. But an accumulating (thesaurierend) fund pays nothing out — it rolls income back into the fund — so there is no cash flow to tax during the year. Rather than let that income go untaxed until you sell, Germany taxes a notional minimum return each year. That notional amount is the Vorabpauschale.
How the Vorabpauschale is calculated
Basisertrag = fund value on 1 January × Basiszins × 0.7.
The Vorabpauschale is the Basisertrag, but capped at the fund's actual gain for the year (so it is zero if the fund fell), reduced by any distributions already taxed, and then reduced by Teilfreistellung. Your bank collects the tax on it in January of the following year.
The Basiszins (base rate) is set annually by the Federal Ministry of Finance: 2.53% for 2025 and 3.20% for 2026. A worked example makes it concrete:
- You hold an accumulating equity ETF worth €10,000 on 1 January 2025. It rises to €10,800 during the year (an €800 gain).
- Basisertrag = €10,000 × 2.53% × 0.7 = €177.10. That is below the €800 actual gain, so it is not capped.
- Apply the 30% Teilfreistellung for an equity fund: €177.10 × 0.70 = €123.97 taxable.
- Tax at 26.375% ≈ €32.70, collected by your bank in January 2026 (covered first by any unused Sparer-Pauschbetrag).
Crucially, the Vorabpauschale is not an extra tax — it is a pre-payment. The amounts you have been taxed on are added to your cost basis, so when you finally sell, the taxable gain is reduced by everything already taxed via the Vorabpauschale. It shifts when you pay, not how much in total. There is no Vorabpauschale in a year the fund did not rise.
Teilfreistellung (partial exemption)
Because investment funds pay some tax at fund level, Germany grants a Teilfreistellung — a partial exemption on the investor's side to avoid double taxation. It applies to both distributions and capital gains:
| Fund type | Exemption |
|---|---|
| Equity fund (≥ 51% equities) | 30% |
| Mixed fund (≥ 25% equities) | 15% |
| Real-estate fund | 60% |
| Predominantly foreign real-estate fund | 80% |
So a gain on a broad equity ETF is only taxed on 70% of its value at the 26.375% rate — an effective rate of roughly 18.5% before allowance.
Anlage KAP and what the report gives you
Anlage KAP is the capital-income schedule attached to your income tax return. You need it to claim unused Sparer-Pauschbetrag, to request the Günstigerprüfung (which applies your marginal rate instead of 25% if that is lower), to declare income from a foreign broker where no German tax was withheld, or to reconcile withholding across accounts.
The AllInvestView tax report assembles the figures you need:
- Realised gains across all brokers with the 26.375% rate applied and lot matching.
- Dividend income with withholding recorded per position.
- Multi-currency conversion using historical exchange rates for foreign holdings.
- Exports to PDF, Excel and CSV for your Anlage KAP or Steuerberater.
It applies the flat Abgeltungsteuer but does not compute the Vorabpauschale, the Teilfreistellung split or your personal allowance automatically — your bank typically handles the withholding, and the report gives you the underlying numbers to reconcile and file.
Frequently asked questions
Not tax advice. This page summarises the main German investment tax rules for the 2025 and 2026 tax years (25% Abgeltungsteuer plus Soli, the €1,000 Sparer-Pauschbetrag, the Vorabpauschale with a 2.53% Basiszins for 2025 and 3.20% for 2026, and Teilfreistellung). Rates and rules change and your circumstances differ. Confirm your position with the Finanzamt or a qualified Steuerberater before acting.