Overview of the most important aspects
Overview of the most important aspects
- Flat-rate taxation
With effect from 1 January 2009, dividends, interest and certain capital gains of private Investors are generally taxed at the uniform withholding tax rate of 25% plus solidarity surcharge and, if applicable, church tax. The previous half-income procedure for dividends and certain capital gains no longer applies as a general rule. This tax deduction generally covers the income tax payable by private Investors. Exceptions: if the personal tax rate is less than 25 %, it is possible to apply for tax assessment at this personal rate of taxation. Moreover, an application may be made for a tax assessment, inter alia to take advantage of any loss carried forward or to offset foreign taxes.
- Capital gains at investor level (grandfathering)
Certain securities, e.g. equities acquired prior to 1 January 2009, enjoy grandfathering protection. This means that capital gains from these securities can continue to be received tax-free after they have been held for more than one year. This also applies to units in ETFs.
- Capital gains at fund level
With effect from 1 January 2009, tax is generally also payable on distributed capital gains that the fund generates through buying and selling securities as well as through forward transactions. These have so far been tax-exempt for private Investors ("fund privilege"). Certain capital gains, e.g. from the sale of equities or certificates that track equities or indices fully, however, will in future not be taxed until the time of distribution, such that tax deferral can be obtained through accumulation.
For this reason private Investors who invested in an ETF before 1 January 2009 have an advantage. Certain capital gains that the fund generates through reallocations remain tax-exempt for these Investors. It is essential, however, that the fund does not distribute these capital gains, or only distributes those capital gains from the sale of securities or forward transactions that the ETF acquired prior to 1 January 2009. Private Investors who acquire ETFs from 1 January 2009 nevertheless also benefit from the tax deferral through accumulation of certain capital gains.
- Annual saver’s allowance
With effect from 1 January 2009 an annual saver's allowance of EUR 801 per income-taxpayer per year (EUR 1,602 for spouses assessed together) is applicable. This replaces the saver's allowance of EUR 750/1,500 that applied until 31 December 2008 and the allowance for income-related expenses of EUR 51/102. All income-related expenses that are actually incurred are covered by the saver's allowance, i.e. an amount higher than the saver's allowance is not possible.
- Tax deduction at source
Withholding tax is based on the concept of tax payment at source (paying agent). In the case of accumulating ETFs, this is the German investment company and for distributing ETFs it is the institution maintaining the custody account (note: applies to interest; the investment company withholds interest income tax (KESt) on German dividends in the case of distributing ETFs).
In the case of distributing funds, tax is paid on distributed dividends, interest and certain capital gains as at the distribution date. For accumulating funds, tax is only paid on dividends, interest and certain capital gains as at the accumulation date (fiscal year-end for the fund). The capital gains are not otherwise subject to any applicable tax until the units are sold by the Investor. In order to avoid double-taxation, the capital gains are adjusted for the taxed accumulation amounts that have arisen up to that time.
The information on withholding tax [Abgeltungsteuer] is of a general nature, is directed at private investors ("Investor" below) and is not addressed to the specific situation of an Investor. Such information is based exclusively on German law, which may be amended retroactively under certain circumstances. We advise that the information as presented does not constitute tax advice and does not claim to offer a comprehensive basis for decision-making. Although we make every effort to provide reliable and up-to-date information, we cannot guarantee that all the information is accurate at the time of compiling this website, nor that such information will be accurate in the future. No Investor should act solely on the basis of the information on this website. Instead, appropriate professional advice should always be obtained and a thorough analysis of the particular tax situation should be carried out. BlackRock Asset Management Deutschland AG does not guarantee that such information is complete and accurate; in particular, it shall not be liable for losses or damage that result or have resulted from use of the above-mentioned information on withholding tax.