Capital Gains Tax in Germany (Abgeltungsteuer): Guide for Expats 2026

The Flat-Rate Withholding Tax (Abgeltungsteuer): 25%

Since 2009, Germany taxes capital gains at a flat 25% withholding tax (Abgeltungsteuer) plus 5.5% solidarity surcharge on the tax and optionally church tax. The effective rates are:

• Without church tax: 26.375% (25% + 1.375% solidarity surcharge)
• With 8% church tax (Bavaria, Baden-Wuerttemberg): 27.82%
• With 9% church tax (all other states): 27.99%

The tax is automatically withheld by German banks and remitted to the tax office. This means you generally do not need to report these gains on your tax return, though voluntary reporting can sometimes be advantageous (see below). The Abgeltungsteuer applies to interest, dividends, and realized capital gains from the sale of financial instruments.

The Saver Allowance (Sparerpauschbetrag)

Each taxpayer has a tax-free saver allowance of 1,000 euros per year (2,000 euros for married couples filing jointly). Capital gains up to this threshold are completely exempt from tax. To use the allowance, you must file an exemption order (Freistellungsauftrag) with your bank. If you have accounts at multiple banks, you can split the allowance, but the total across all banks must not exceed 1,000 euros.

Review your exemption orders annually and redistribute them based on where you expect the most gains. Unused allowance portions expire at year-end and cannot be carried forward.

Partial Exemptions for Investment Funds (Teilfreistellung)

Since the 2018 Investment Tax Act, fund gains benefit from partial exemptions that reduce the taxable portion:

For a world equity ETF with 1,000 euros in capital gains, only 700 euros are taxable. At 26.375%, the tax is 184.63 euros instead of 263.75 euros, a saving of 30%.

Loss Offsetting (Verlustverrechnung)

Losses from investments can be offset against gains, but with restrictions:

• Stock losses can only be offset against stock gains (separate loss pot).
• Other losses (from funds, bonds, interest) can be offset against all capital gains.
• Derivative losses (options, futures) are capped at 20,000 euros per year for offsetting.
• Unused losses carry forward indefinitely to future years.

If you hold accounts at multiple banks, you must request a loss certificate (Verlustbescheinigung) by December 15 to offset losses across banks in your tax return.

Foreign Withholding Tax and Double Taxation

When you receive dividends from foreign stocks, the source country may withhold tax. Thanks to double taxation agreements (Doppelbesteuerungsabkommen), a portion can be credited against your German Abgeltungsteuer:

Cryptocurrency Taxation in Germany

Cryptocurrency (Bitcoin, Ethereum, etc.) is treated as a private asset, not as a financial product. This classification has major consequences:

• One-year holding period: If you hold crypto for more than one year, gains are completely tax-free.
• Threshold of 1,000 euros: For sales within one year, gains below 1,000 euros per year are tax-free. If gains exceed this threshold, the entire gain is taxable.
• Personal income tax rate: Taxable crypto gains are taxed at your individual rate (up to 45%), not the flat 25% Abgeltungsteuer.
• FIFO method: For partial sales, the First-In-First-Out method determines which coins are sold.
• Staking income: Staking rewards and lending income are taxed as other income with a 256-euro annual threshold. A later sale of staked coins is subject to the one-year holding period.

This means Germany has one of the most crypto-friendly tax regimes in Europe for long-term holders. If you hold for one year, you pay zero tax regardless of the gain amount, with no limit.

The Assessment Check (Guenstigerpruefung)

If your personal income tax rate is below 25%, you can request an assessment check (Guenstigerpruefung) by filing Anlage KAP in your tax return. The tax office then applies your lower personal rate instead of the flat 25%. This typically benefits students with part-time jobs, retirees with low pensions, or part-time workers with taxable income below approximately 19,000 euros. The tax office automatically applies whichever rate is more favorable; there is no risk of paying more.

Advance Flat Rate for Accumulating ETFs (Vorabpauschale)

Accumulating funds that reinvest dividends rather than distributing them are subject to an annual advance flat rate (Vorabpauschale). This ensures minimum taxation even without distributions. The calculation is based on the fund value at the start of the year multiplied by a base interest rate set by the Bundesbank (approximately 2.29% for 2026), multiplied by 0.7, then reduced by any partial exemption.

For example: a 50,000-euro equity ETF generates a Vorabpauschale of approximately 562 euros (after 30% partial exemption), resulting in about 148 euros in tax. This is deducted from the settlement account in January. When you eventually sell the ETF, previously paid Vorabpauschale amounts are credited against the capital gains tax to prevent double taxation.

Key Takeaways for Expats

• Capital gains are taxed at a flat 26.375% (including solidarity surcharge) in Germany.
• The first 1,000 euros in capital gains are tax-free (file a Freistellungsauftrag with your bank).
• Equity ETFs benefit from a 30% partial exemption, reducing the effective tax rate.
• Stock losses can only offset stock gains; other losses are more flexible.
• Cryptocurrency held for over one year is completely tax-free, a significant advantage.
• Foreign dividend withholding is credited against German tax; excess amounts may need to be reclaimed from the source country.
• If your personal tax rate is below 25%, request the Guenstigerpruefung for a lower rate.