Index Fund Taxation: Strategies to Impose Taxes on Exchange-Traded Funds Without Filing a Tax Return
In Germany, ETF savings plans are subject to capital gains tax at a flat rate of 25%, plus a 5.5% solidarity surcharge on the tax and church tax if applicable. This taxation applies to the profits from ETFs, similar to stocks, with no distinction between long-term and short-term holdings.
Key Tax Points
- Capital gains tax is a flat 25% on your ETF profits.
- Solidarity surcharge adds 5.5% on top of this 25% tax.
- Church tax may also apply, typically 8% or 9% of the capital gains tax, depending on the region.
- An annual saver’s allowance (Sparer-Pauschbetrag) of €1,000 per person (€2,000 for married couples) applies, meaning gains up to this amount are tax-free if an exemption order is filed.
- Losses from ETFs can only offset gains from other equity investments, not other income sources.
- The "Advanced flat rate" withheld on ETF earnings during the year is deducted against final capital gains tax upon sale, so no double taxation occurs.
- Taxes are withheld automatically by brokers in Germany, so you do not usually need to file separately for these taxes.
The Advance Flat Rate
Since 2018, an advance tax ("Advanced flat rate") is deducted yearly on ETF profits by banks or brokers, even if you have not sold your ETF units. This advance tax is credited when you sell to avoid double taxation.
The Partial Exemption
For equity ETFs containing at least 51% stocks, a partial exemption of 30% applies, meaning you only have to tax 70%, while 30% is exempt from tax. This so-called partial exemption applies to many ETFs since the investment tax reform of 2018.
Tax-Exempt Income Limit
For tax-exempt income, an individual's receipts per year may not exceed the basic allowance of €12,096 (€11,784 in 2024) for singles, or €24,192 (€23,568 in 2024) for married couples.
Exemption Order
To exempt your tax-free allowance from taxation, submit a tax exemption order to your broker or deposit bank.
Investing in Accumulating ETFs
If you regularly exhaust your saver's allowance before investing in ETFs, you should choose an accumulating ETF from the start.
Tax Calculator
The tax calculator can help play out different tax scenarios for future ETF payouts, including one-time investments, monthly savings, and tax on dividends.
In 2025, the maximum amount increases due to the increase in the basic allowance, to €13,132 for singles and €26,264 for married couples.
In 2024, the maximum amount for tax-free payments is €12,820 for singles and €25,640 for married couples.
If your income exceeds the allowances during the validity period of the tax-exempt ruling, you must inform the tax office and your bank.
Synthetic or swap ETFs, which do not hold any stocks themselves but only derivatives, do not fall under the partial exemption.
If you dispose of ETFs at a loss, note that the advance tax already deducted cannot be reclaimed.
When investing in ETF savings plans in Germany, tax on returns is managed through this system, and you should ensure your broker has your exemption order to use the saver’s allowance.
- For personal-finance planning, considering the advance tax deducted on ETF profits by banks or brokers in Germany, it's essential to choose an accumulating ETF if you frequently exhaust your saver’s allowance before investing.
- When investing in equity ETFs in Germany, keep in mind that, due to the partial exemption, only 70% of the profits are subject to capital gains tax, while 30% remains tax-free, provided the ETF contains at least 51% stocks.
