The "Abgeltungsteuer" is a collection technique for taxes on capital income and on gains from the sale of securities held as private assets (in particular debt securities and shares), which was introduced in Germany as of the 2009 assessment period. This means that a so-called withholding tax procedure is applied to investment income, similar to that used for wage tax.
With this tax, a uniform tax of 25 % is levied on investment income. This is independent of the individual tax rate. As a result, individual investment income is generally no longer part of the annual income tax return. Instead of via the annual income tax assessment, this tax is transferred directly by the financial institutions to the tax office for each customer. The procedure represents a simplification of the taxation of investment income.
If you only have a low taxable income, you can apply for a favourable tax assessment at the tax office responsible for you. It will then apply your personal tax rate to the investment income earned if this results in a lower tax burden than would be the case by way of the 25% tax deduction at the source of the income. As a rule of thumb, if your personal marginal tax rate is below 25 %, it may be worthwhile to apply for a favourable tax treatment.
- Publication of the
- Information from the Federal Ministry of Finance on the final withholding tax.
The "Abgeltungsteuer" was inserted into the Income Tax Act by Article 1 of the Corporate Tax Reform Act 2008 of 14 August 2007 (published in the Federal Law Gazette 2007, Part I, p. 1912).
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