Proposals have been put forth by the Commission regarding the matter.
Investing in Germany can be a lucrative venture, but it's important to understand the tax implications, especially when it comes to capital gains. Here's a comprehensive guide on how to apply for a Capital Gains Tax Exemption Order in Germany.
Who is Eligible?
Eligible individuals are those whose income does not exceed the valid basic allowance of €12,096 for 2025 and €11,784 for 2024. If you have capital gains (from dividends, interest, etc.) that do not exceed the annual tax-free allowance of €1,000 for capital income, you are eligible to apply for a Capital Gains Tax Exemption Order.
Applying for the Exemption Order
- Obtain the Exemption Order Form: You can get the Freistellungsauftrag for capital gains from your bank, savings bank (Sparkasse), building society (Bausparkasse), or insurance company where your investments are held.
- Fill out the Application Form: Provide your personal and account details in the application form.
- Submit the Form: Submit the completed form to your financial institution in a timely manner to prevent automatic tax deductions.
- Exemption Approval: Once submitted and accepted, your bank will stop withholding the capital gains tax on your income up to the allowance.
Important Considerations
- If you do not submit the exemption order and tax has been withheld unnecessarily, you can later claim a refund through your tax return.
- For joint accounts of spouses, the saver's allowance is doubled to €2,000.
- The Freistellungsauftrag for capital gains is the responsibility of the investor and is not automatically issued.
- A capital gains tax exemption order is required for each bank where you have accounts.
- The capital gains tax exemption order is valid indefinitely, unless an end date is specified on the form.
Additional Notes
- If you are filing for tax relief on capital gains related to international issues or double taxation agreements, applications may need to be filed electronically via the Federal Central Tax Office's online portal, often accompanied by a certificate of residence confirming your eligibility under the treaty.
- Amounts exceeding the tax-free allowance are automatically taxed at the flat rate of 25% plus solidarity surcharge and church tax if applicable.
In summary, the exemption order is a formal request you submit to your bank or financial institution to avoid immediate withholding of capital gains tax on amounts up to €1,000 annually. Timely submission is key to enable exemption under German tax law.
[1] Income Tax Act (EStG), Section 44a [2] Federal Central Tax Office's online portal [3] Tax Rates for 2025
- If you have personal-finance savings in Germany and your income does not exceed the annual limit set by the Income Tax Act (EStG), Section 44a, you may be eligible to apply for a Capital Gains Tax Exemption Order, which allows for other finance investments such as stocks, bonds, or mutual funds to be exempt from the capital gains tax up to €1,000 annually.
- When it comes to personal-finance management, individuals who are interested in investing in Germany can utilize the Capital Gains Tax Exemption Order as a means to strategically reduce their tax burden, especially for individual investments that generate capital gains.
