Capital Gains Tax in Germany: What Expat Investors Actually Pay (2026)

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The Flat Rate: Where 26.375% Comes From

Germany doesn't tax investment gains at your income tax rate. Capital income has its own flat tax, the Abgeltungsteuer:

• 25% base rate on gains, dividends and interest
• plus 5.5% solidarity surcharge, calculated on the tax itself, bringing the effective rate to 26.375%
• plus church tax of 8 to 9% on the tax amount if you're a registered church member, pushing the total to roughly 27.8 to 28%. Not a church member? Then this doesn't apply to you, and if you were registered without realizing it, our church tax guide shows how to check and leave.

"Abgeltung" means "settlement": once your German broker withholds the tax, your obligation is settled. The gains don't appear in your income tax return, they don't push you into a higher bracket, and they don't affect your salary taxation. High earners like this system. If your personal income tax rate is below 25%, you can do better, and we'll get to that.

What Germany Taxes (and What It Doesn't)

The flat tax covers all typical investment income:

• Profits from selling stocks, ETFs and funds
• Dividends and fund distributions
• Interest from savings accounts, bonds and broker cash balances

Two prominent exceptions catch expats off guard, in both directions:

• Crypto is not capital income. Germany treats it as a private sale: hold longer than one year and your profit is completely tax-free; sell within a year and it's taxed at your full personal income tax rate instead. Your broker does not withhold anything for crypto, even if you bought it in the same app as your ETFs.
• Real estate follows the same private-sale logic, with a ten-year holding period instead of one.

Your €1,000 Head Start

The first €1,000 of capital income per year is tax-free (€2,000 for married couples filing jointly). This is the Sparer-Pauschbetrag, and it only works if you activate it: file a Freistellungsauftrag in your broker's tax settings, ideally before your first trade.

Three practical details:

• You can split it across banks. €700 at your broker, €300 at the bank paying interest on your savings. The total across all institutions just can't exceed €1,000.
• It applies retroactively within the year. Set it in November and the broker refunds the tax withheld since January.
• Forgot it entirely? The withheld tax isn't lost. You reclaim it through the KAP annex of a tax return, just with more paperwork.

We covered the setup step by step in our beginner's guide to investing in Germany.

The Vorabpauschale: The January Charge Nobody Warned You About

If you hold accumulating ETFs, a small tax deduction appears in your broker account every January. That's the Vorabpauschale, an advance tax on last year's assumed fund growth, and it exists so that accumulating funds don't defer taxes forever.

The 2026 numbers: the government set the base rate (Basiszins) at 3.20%, the highest since the rule was introduced. The taxable base is 70% of that, about 2.24% of your fund value at the start of the year. After the 30% stock fund discount and the flat rate, expect roughly €35 per €10,000 of stock ETF holdings.

Three things keep it harmless:

• It counts against your €1,000 allowance, so small portfolios often pay nothing.
• Whatever you pay is credited later: when you eventually sell, the taxed amounts are deducted from your capital gain.
• Your broker calculates and books everything. Your only job is having a few euros of cash in the account each January.

The 30% Discount Most Expats Miss

Funds holding at least 51% stocks qualify for the Teilfreistellung (partial exemption): 30% of all gains, dividends and Vorabpauschale amounts from these funds are tax-free before the flat rate is even applied. The effective tax on a world ETF is therefore not 26.375% but roughly 18.5%.

You don't apply for this. Your broker classifies the fund and applies the exemption automatically. It's one more reason the standard expat setup, a broad stock ETF at a German broker, is also the tax-efficient one. Mixed funds (25 to 50% stocks) get 15%, bond funds get nothing.

Losses: What You Can Offset

Losses reduce your taxable gains, but Germany sorts them into separate buckets:

• The general bucket: losses from ETFs, funds, bonds and dividends offset any other capital income.
• The stock bucket: losses from selling individual shares only offset profits from selling individual shares. This restriction is controversial; the Federal Fiscal Court considers it unconstitutional and a Constitutional Court decision is expected in 2026. Until then, the separation stands, and tax assessments on this point are issued as provisional.
• The old derivatives limit is gone. The €20,000 annual cap on offsetting losses from futures and options was scrapped retroactively in late 2024. Brokers must apply the full offsetting in their withholding from January 2026.

Your German broker runs these loss pots automatically through the year. Two situations need action from you: if you want to use losses from one broker against gains at another, request a Verlustbescheinigung (loss certificate) by December 15 and claim it in your tax return. And unused losses carry forward to future years on their own.

When You Actually Need a Tax Return

For most expats with a German broker: never, at least not for investments. File the KAP annex only when one of these applies:

• You use a foreign broker. Nothing was withheld, so you must declare every sale, dividend and Vorabpauschale yourself. This is the single best argument for a German broker, and our broker comparison shows the English-friendly options.
• Your income tax rate is below 25%. Students, part-time workers, low first-year income: request the Günstigerprüfung in the KAP annex and the Finanzamt refunds the difference between 26.375% and your personal rate. The check can only work in your favor.
• You want to reclaim something: a forgotten Freistellungsauftrag, losses from another bank, or foreign withholding tax on US or Swiss dividends that exceeds the credited amount.

If you're filing anyway, tax software built for expats handles the KAP annex in English, and our tax return guide walks through the full process.

Leaving Germany with a Portfolio

When you deregister and move your tax residence abroad, German withholding on your account ends and your new country taxes future gains under its own rules. For most expats with a normal ETF portfolio, that's the whole story, and our leaving Germany checklist covers the practical steps.

Large portfolios have a newer rule to know: since January 2025, Germany applies an exit tax on fund holdings. If you invested at least €500,000 in a single fund (or hold 1% or more of a fund), and you were subject to unlimited German taxation for at least 7 of the last 12 years, moving away can trigger tax on your unrealized gains, at roughly 28.5%, without any sale. The threshold applies per fund, not per portfolio. If you're anywhere near these numbers, get a cross-border tax adviser involved before you book the move, not after.

The Short Version

1. German broker: tax is automatic, you file nothing.
2. Set the Freistellungsauftrag for your first €1,000 of tax-free gains.
3. Keep cash in the account in January for the Vorabpauschale.
4. Stock ETFs are taxed at ~18.5% effective, thanks to the 30% exemption.
5. File the KAP annex only for foreign brokers, low income or reclaims.

Frequently Asked Questions (FAQ)