ETFs in Germany: taxes, savings plan and brokers

ETF (Exchange Traded Fund) — exchange-traded funds

An ETF is a fund that tracks the composition of a stock market index. By buying a single share, you don’t get the stock of an individual company, but rather a basket of hundreds or thousands of securities all at once. The manager doesn’t try to beat the market, so the management fee is many times lower than that of active funds.

How it works

Index. MSCI World — around 1’300 companies from developed countries. FTSE All-World and MSCI ACWI add emerging markets. S&P 500 — the 500 largest US companies, DAX - The 40 largest companies in Germany.
Special fund. The fund’s assets are legally segregated from the property of the management company. If the provider goes bankrupt, the fund’s securities do not form part of the liquidation estate.
UCITS. European ETFs operate under the UCITS directive: mandatory diversification, daily liquidity, regulatory oversight. Most funds available in Germany are registered in Ireland or Luxembourg.

Accumulating or distributing

Distributing — dividends are paid into the account, usually once a quarter or once a year. It’s convenient if you want to use the tax-free allowance Sparerpauschbetrag every year or are already living off your portfolio.

Accumulating — dividends are automatically reinvested within the fund. Fewer transactions, compound interest works without your intervention. This option is usually chosen in the accumulation phase.

What do the costs consist of?

TER (Total Expense Ratio) — the fund’s annual management fee; for broad-based index ETFs, this is approximately 0.07–0.25 % per annum. It is already factored into the quoted price and is not charged as a separate fee.
Tracking Difference — the fund’s actual underperformance relative to the index over the year. Sometimes it is lower than the TER, sometimes higher. This is the figure you should be looking at.
Broker’s commission — for a one-off purchase and for fulfilling the savings plan. For some brokers, the Sparplan is free.
Spread — the difference between the bid and ask prices on the exchange. It is at its narrowest during Xetra’s main trading hours.

Sparplan: saving in small amounts

An ETF savings plan — automatic purchases of a fixed amount at set intervals. The minimum monthly contribution with German brokers starts at €1–25. The idea behind this approach is that you buy whether the market is rising or falling, rather than trying to time the market. We’ll look at the mechanics in more detail in the article on ETF-Sparplan.

Buffett’s $1 million bet

In 2008, Warren Buffett made a $1 million bet that a standard S&P 500 index fund would outperform a portfolio of five actively managed hedge funds over a ten-year period. Ten years on, the index fund won by a wide margin — mainly due to the difference in fees. We analysed the details in our Instagram.

Brokers for ETFs in Germany

An account for buying ETFs is opened with a broker or at a bank. The main difference, which is most often forgotten, is whether the broker withholds German tax automatically. With a German broker, the tax is calculated and transferred by the broker itself; with a foreign one, you declare the income yourself via Anlage KAP.

Broker	Where is the score kept?	German tax is deducted automatically	ETF-Sparplan
Scalable Capital	Germany	Yes	There is
Trade Republic	Germany, Trade Republic Bank GmbH	Yes	There is
ING	Germany, ING-DiBa AG	Yes	There is
Consorsbank	Germany, BNP Paribas	Yes	There is
Freedom24	Cyprus, Freedom Finance Europe Ltd, CySEC licence CIF 275/15	No — income must be declared independently via Anlage KAP	There is

German brokers operate a Freistellungsauftrag: as long as annual income does not exceed the tax-free allowance, no tax is withheld at all. Freedom24 does not have this option, but clients’ accounts are protected by the Cypriot Investor Compensation Fund (ICF) up to an amount of €20,000. Everyone’s tariffs change regularly — check the current conditions on the broker’s website before opening an account. Useful summary: Comparison of ETF brokers on extraETF.

Links to open brokerage accounts are provided below.

Taxation of ETFs in Germany

Income from securities is subject to Abgeltungsteuer — 25 %, plus a solidarity levy of 5.5 % of the tax amount itself, that is to say, in effect 26,375 %. If you pay church tax, a further 8 or 9 % is added to the tax amount. The solidarity levy on capital gains has not been abolished: the 2021 reform only removed it from income tax.

Sparerpauschbetrag — tax-free allowance

€1,000 per person per year, €2,000 for married couples filing a joint tax return. To prevent the bank from automatically withholding tax, a Freistellungsauftrag is submitted to the broker. If there are multiple accounts, the limit can be split between them, but the total must not exceed the established amount.

Teilfreistellung — partial tax exemption

For funds with a shareholding of 51 % or more 30 % is not subject to tax. The actual amount withheld from profits on the equity ETF is approximately 18.46 % instead of 26.375 %. The exemption is applied automatically; no application is required.

Vorabpauschale — advance lump sum tax

The most unusual part of the German system: if a fund has grown over the year and no dividends have been paid into the account (accumulating), the state still taxes a deemed minimum income.

Formula: fund value at the start of the year × base rate × 70 %. The base interest rate (Basiszins) on 2026 — 3.20 %, for 2025 it stood at 2.53 %. If the actual increase for the year is less than the calculated figure, the lower of the two is taken. If the fund has not grown over the year, the Vorabpauschale is not calculated at all.

They are writing her off in January next year: the broker deducts tax from the current account. Therefore, at the beginning of January, there must be free cash in the account — otherwise, the broker has the right to sell some of the securities. The paid Vorabpauschale is deducted from the tax upon a subsequent sale; tax is not levied twice on the same income.

Example. Promotional ETF, value as of 1 January 2026 — €20,000, accumulating, grew by €1,500 over the year.

Calculation basis: 20’000 × 3.20 % × 70 % = 448 €. This is less than the actual increase, so the figure used is €448.
Partial exemption 30 %: subject to tax of €313.60.
Tax 26,375 %: approximately 82,71 €.
Provided that a Freistellungsauftrag is in force and there is an unused limit of €1,000, the deduction will amount to 0 €.

Risks you need to be aware of

Exchange rate risk. During crises, broad indices have lost 30–50 % and taken years to recover. Money that may be needed in the next 5–10 years should not be invested in equity ETFs.
Foreign exchange risk. Around two-thirds of the MSCI World Index consists of US companies. The euro’s appreciation against the dollar reduces returns in euros, even when the index is rising.
Concentration. “In practice, the ‘whole world’ in the MSCI World means a bet on the US and a few of the largest technology companies—their share in the index is very large.
Tracking Difference. The fund is not obliged to track the index perfectly; underperformance accumulates over the years.
Behavioural risk. Private investors suffer their main losses not from the market, but from panic selling.
This is not a bank deposit. An ETF is a special fund, not a deposit. There is protection against the provider’s insolvency, but no protection against a fall in the price; the deposit guarantee scheme does not apply here.

What’s new in 2026: Frühstart-Rente

The government plans to provide additional funding €10 a month For every child aged between 6 and 18 whose main place of residence is in Germany. The money is paid into an individual investment account; parents and relatives can make additional contributions of up to €6,840 per year. Income generated within the account is tax-free until retirement; it cannot be withdrawn earlier. Children born in 2020 will be the first to be included in the scheme.

The Federal Ministry of Finance’s bill was published on 22 July 2026, and the legislation is planned to be passed by the end of 2026 with retrospective effect from 1 January 2026. For now it is a bill, not a current law — the final terms may still change. We look at how this compares with other savings options in the section on pension savings.

Frequently asked questions

How much money do I need to get started?

Savings plans with German brokers start at €1–25 a month. For a single purchase, the price of one fund share is enough — usually tens of euros.

Accumulating or distributing — which should you choose?

During the accumulation phase, people tend to opt for an accumulation-type account: it involves fewer steps, and compound interest works automatically. A distribution-type account is useful if you want to make use of the tax-free allowance each year or are already receiving income from your portfolio.

What is a Vorabpauschale in simple terms?

A small advance tax for the year in which the fund grew without making any payouts to you. It is debited in January of the following year and then deducted from the tax upon sale.

Do I need to submit a tax return?

If you hold an account with a German broker and have submitted a Freistellungsauftrag, tax is withheld automatically and you do not usually need to file a tax return for ETFs. Anlage KAP will be required if you hold an account with a foreign broker, if your tax allowance is split across several banks, if you are liable for church tax, or if your personal tax rate is below 25 %.

What will happen to the money if a broker goes bankrupt?

The securities are held in custody and remain your property; they do not form part of the broker’s bankruptcy estate. Separate compensation schemes apply: in Germany, the Entschädigungseinrichtung der Wertpapierhandelsunternehmen (EdW), and in Cyprus, the Investor Compensation Fund up to €20,000.

ETF or Riester?

These are different instruments: ETFs are free savings without state support and without restrictions on withdrawal, Riester — a subsidised product with strict payout rules. They are not compared as either/or, but by objective and horizon.

Important

The material is for informational purposes only and does not constitute an individual investment recommendation, tax or legal advice. Finber is an insurance broker pursuant to § 34d GewO and a property loan intermediary pursuant to § 34i GewO; we do not manage securities and do not select specific funds. The value of securities may rise and fall, and past performance is no guarantee of future results. Regarding tax matters, please consult a tax adviser (Steuerberater).

The broker links on this page are affiliate links. If you open an account through one of these links, we may receive a commission; this does not affect the terms of service for you.

With pension savings, the tax works differently: contributions and profits within the account are not taxed, but pension payouts are fully subject to income tax — though the state tops up payments in return. How this will work from 2027 is explored in the breakdown on government-backed pension savings.

ETFs — exchange-traded investment funds