What tax must be paid on investment income in Germany?
This is the most frequent question, as well as the question about passive investment in ETF Sparplan.
Investment taxation in Germany consists of the following parts:
-Income tax - 25%
-Tax solidarity, if applicable
-Church tax, if applicable
Thus, the average tax on investment income will be between 26% and 28%.
We have published a new more detailed article about the taxation of investments in Germany. Go to link.
In 2020, interest in investing in the stock markets in Germany has grown by 70%.
Good news 1.
German brokers and banks will withhold tax from you on their own. This is a plus. This principle is called Withholding tax.
Good news 2.
There is a tax-free amount of investment income, the so-called Freibetrag – 1.000 € for singles or 2 € for married people (from 000/01.01.2023/XNUMX). For income from investments (including dividends paid) within these amounts at the end of the calendar year, there is NO need to pay tax. But it is better to notify your broker of your intention to exercise this right!!!
If you forget to notify, the broker will automatically withhold tax from you. But when you file your tax return, you can get it back.
Freibetrag free investment income amount - 1.000 €
