Taxation of Stock Market Transactions in Germany

In Germany, profits from stock market trading—including the purchase and sale of shares, ETFs, dividends, and interest income—are generally subject to a flat-rate withholding tax known as Abgeltungsteuer or Kapitalertragsteuer.

The total tax burden is generally 26.375%, consisting of the following components:

Tax Type	Rate	Tax Base
Capital Income Tax (Abgeltungsteuer)	25.00%	Net profit (gains minus eligible losses)
Solidarity Surcharge (Solidaritätszuschlag)	1.375%	5.5% of the capital income tax (25% × 5.5%)
Church Tax (Kirchensteuer) — optional	Approx. 1.4%–1.5%	Only if you are a registered member of a religious community subject to church tax; generally 8% or 9% of the capital income tax, depending on the federal state

If you pay church tax, the total tax burden can rise to approximately 27.82%, although the tax calculation is adjusted slightly to account for the deductibility of church tax. Without church tax, the standard rate is 26.375%.

The Tax-Free Allowance (Sparer-Pauschbetrag)

In Germany, everyone is entitled to an annual tax-free allowance for investment income:

• €1,000 per year for single individuals.
• €2,000 per year for married couples or registered civil partners filing jointly.

How does it work? If you hold your investments with a German brokerage firm, such as Trade Republic or Scalable Capital, you can submit a tax exemption order (Freistellungsauftrag). The broker can then apply the allowance to your eligible investment income, withholding tax on amounts exceeding the available allowance.

How Is Tax Withheld? (German vs. Foreign Brokers)

The tax process depends on where your securities account is held.

• German broker or bank: Taxation is generally automatic. When you realize a profit by selling a position or receive a dividend, the bank or broker calculates and withholds the applicable tax and transfers it to the tax authorities (Finanzamt). In many cases, you are not required to report this income separately in your annual tax return.
• Foreign broker (e.g., Interactive Brokers, eToro, or Revolut): These providers generally do not withhold German investment income tax. You receive the income without German tax being deducted, but you are responsible for declaring it in your annual German tax return using Appendix KAP (Anlage KAP) and paying any tax due.

Loss Offsetting (Verlustverrechnung)

Realized stock market losses can be offset against eligible investment gains, reducing your taxable income. However, an important rule applies: losses from the sale of individual shares can generally only be offset against gains from the sale of individual shares. They cannot be directly offset against ETF gains, for example.

German brokers generally track these losses automatically in separate loss offset accounts known as Verlusttöpfe.

Are There Tax Benefits for Long-Term Holdings?

Generally, no. Unlike certain cryptocurrency transactions or real estate sales, where specific holding-period rules may affect taxation, shares and ETFs are generally not subject to a preferential tax rate based on how long you hold them. Whether you hold a share for one day or 15 years, the realized gain is generally subject to the applicable investment income tax rules.

Tip for low-income earners: If your total annual income, including your salary, is low enough that your applicable personal income tax rate is below 25%, you can request taxation at your individual income tax rate through the Günstigerprüfung. If this results in a lower tax liability, the tax office may refund the difference.

Losses from Previous Years

In Germany, investment losses from previous years can be carried forward to reduce the tax payable on eligible gains in the current or future years. This process is known as a loss carryforward (Verlustvortrag).

The system is subject to specific rules governing how losses can be carried forward and offset.

Time Limit: No Expiration Date

Stock market losses can generally be carried forward indefinitely. For example, if you realized a substantial loss in 2022, you may be able to offset it against eligible gains in 2026 or 2030, until the loss balance has been fully used. However, carrying losses backward (Verlustrücktrag) to offset investment income from the previous year is generally not permitted for capital investment income.

Strict Rules for Loss Offset Accounts (Verlusttöpfe)

Germany divides investment income into different categories, often referred to as loss offset accounts or “baskets.” Losses can generally only be offset against eligible gains in accordance with the rules applicable to each category.

• Share Loss Account (Aktientopf): If you incur a loss from selling individual shares, such as Apple or BMW, that loss can generally be offset only against gains from selling individual shares. It cannot be used to offset ETF profits, dividends, or bond interest.
• General Loss Account (Allgemeiner Verlusttopf): This generally covers other eligible investment income and losses, including ETFs, investment funds, options, certificates, dividends, and interest. Losses in this category can generally be offset against eligible gains from other types of investment income, including gains from individual shares, subject to the applicable tax rules.