Capital gains tax in Germany: a simple guide for investors

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If you’re an expat living in Germany, you’ve probably realised that figuring out how capital gains are taxed feels like assembling IKEA furniture without the manual. It’s not impossible, but a few missing screws can cost you.

This guide walks you through how capital gains tax works in Germany, what expats need to look out for (especially with foreign brokers), and how you can minimise what you pay (legally).

capital gains tax germany guide expats

And if there are any questions, feel to leave it in the comments section. I answer all questions personally.

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Bastien – Settle in Berlin

Capital gains tax in Germany TL;DR

  • Flat tax rate: 25 % + 5.5 % solidarity surcharge + 8/9% Church tax if you pay that too.
  • Applies to: dividends, interest, and realised capital gains from selling financial assets.
  • Tax-free allowance: €1,000 per person (€2,000 for couples).
  • No difference between long-term and short-term gains.
  • Unrealised gains aren’t taxed, except when using some ETFs (unless you leave Germany permanently with >1 % company ownership).
  • Crypto and real estate have their own separate rules.
  • Foreign accounts: You must declare them yourself: no automatic withholding.
  • Non-residents: Usually taxed only on German-source income, often reduced by bilateral tax agreements.

What exactly counts as capital gains in Germany?

In Germany, capital income (Einkünfte aus Kapitalvermögen) covers all profits you earn from money working for you, not you working for money. That includes:

  • Interest (Zinsen) from savings accounts or bonds.
  • Dividends (Dividenden) from shares or mutual funds.
  • Capital gains (Veräußerungsgewinne) when selling shares, ETFs, or funds
  • Profits from crypto assets, but only if sold within a year.

All of this is subject to Germany’s witholding tax (Abgeltungsteuer), a flat 25 % tax withheld directly by the bank or broker at the moment the income is realised. It a component/type of income tax in Germany.

If your bank is based in Germany, it does this automatically and forwards the tax to the Finanzamt. If it’s not, you might have to handle this yourself through your tax return (more on that later).

Who is subject to it?

In Germany, capital gains tax (Kapitalertragssteuer) applies to anyone who earns a profit from selling an asset, but your residency plays a role in it.

German tax residents (anyone living in Germany for more than 183 days a year or with a permanent home here):

  • Taxed on worldwide capital gains: that includes profits from shares, crypto, property abroad, etc.
  • Gains from financial investments (like stocks, ETFs, or interest) are taxed via Abgeltungssteuer (a flat 25% + solidarity surcharge + church tax).

Non-residents (living abroad but owning assets in Germany):

  • Only taxed on German-located capital gains, mainly property or business interests located in Germany.
  • Double taxation treaties may reduce or eliminate this liability, depending on your home country.

How is capital gains tax calculated in Germany?

how much capital gains tax germany

The math

Here’s how the math breaks down:

  • 25 % Abgeltungssteuer (flat rate)
  • + 5.5 % solidarity surcharge (on the tax amount)
  • + optional church tax (8 % or 9 % depending on your state)

In total, you’ll pay roughly 26.38 % on your capital income, or up to 27.99 % if you pay church tax.

Total tax rate = 25 + 25 x 0,055 + 25 x 0,08
Total tax rate = 27,99
Do you pay church tax?Capital gains + Soli + church taxes
No26.38%
Yes, in Bavaria or Baden-Württemberg27.82 %
Yes, in another state27.99 %

The good news? This is a final withholding tax (Abgeltungsteuer literally means “settlement tax”) meaning in most cases, you don’t need to report it again in your tax return.

Taxation on unrealised investment gains (ETFs)

Since the 2018 investment tax reform, accumulating ETFs and investment funds can be taxed in Germany even if you do not sell them, via the Vorabpauschale (pre‑emptive tax). This is a taxable amount based on a base return and the fund’s value at the start of the year, reduced by any distributions already paid.

In practice, German brokers calculate and deduct this tax automatically, and any Vorabpauschale paid is later credited when you sell the investment, so the same gains are not taxed twice.

Example:
If an ETF is worth 10 000€ on 1 January and the applicable base return is 2%, the taxable amount is 200€. After applying the tax free allowance, capital gains tax may be due even though the ETF was not sold.

How to report your capital gains (step-by-step)

If all your investments are with German banks or any German broker, your taxes are usually settled automatically. You only need to file something if:

  • You have foreign investments (foreign brokers, savings accounts abroad).
  • You want to use Günstigerprüfung (more about that later in this post).
  • You need to claim refunds (e.g. unused allowance).

Here’s how:

  1. Collect documents:
    • Annual tax certificates (Steuerbescheinigung) from each bank/broker.
    • Statements from foreign brokers showing gains, losses, and foreign tax withheld.
  2. Fill in Anlage KAP when submitting your tax return

How to reduce or avoid capital gains tax (legally)

Let’s be clear: tax planning is smart, tax evasion is not.
Here are entirely legal and practical ways to minimise what you pay:

how to pay less capital gains tax

Use the tax-free allowance (Sparerpauschbetrag)

Everyone gets a €1,000 annual allowance (€2,000 for married couples filing jointly). Any capital income below that is completely tax-free.

You just need to file a Freistellungsauftrag (tax exemption order) with your bank to activate it. Without this, your German bank will withhold capital gains tax even if your income stays below the limit and you’d have to reclaim it later.

This easily done by giving that financial institution your tax ID (Steuer-Identifikationsnummer) and the amount of exemption you want to allocate to that bank (e.g: 400€ to Bank A, 600€ to Bank B)

Use the “Günstigerprüfung”

If your overall income is low (e.g. you just moved to Germany or freelancing part-time), you can request the Günstigerprüfung in your tax return.
It means your capital income will be taxed at your personal rate instead of 25 %. If that’s lower, you’ll get a refund, as regulated in paragraph 6 of the EStG.

On the form Anlage KAP, check the box for “Günstigerprüfung beantragen” to do that.

Offset losses, even across brokers/providers

Losses from one investment can offset gains from another. Your bank usually keeps track of this in your loss pool (Verlustverrechnungstopf). This enables you to pay tax on your net gains rather than each profitable trade individually. However, share losses can only offset share gains — not interest or dividends.

If you use multiple brokers, you can request a loss certificate (Verlustbescheinigung) before year-end (usually before 15/12) to transfer it between institutions. You can then include that certificate in your tax return (using Anlage KAP) to offset gains held at another bank.

Choose tax-efficient funds

Some ETFs and mutual funds enjoy a Teilfreistellung (partial exemption). It means only part of their income is taxable. For example, an equity fund might get a 30 % exemption, so you’re only taxed on the remaining 70 %.

The tax-free portion depends on the type of ETF:

  • Equity ETFs: 30 % of gains are tax-free
  • Mixed funds: 15 % tax-free
  • Real estate funds: 60–80 % tax-free, depending on where the properties are located

Hold assets longer if possible

While there’s no long-term discount for stocks, certain assets benefit from holding:

  • Crypto: hold > 1 year = tax-free gain
  • Property: hold > 10 years = tax-free gain
  • For foreign moves, delaying sales until after you’re non-resident (and under a treaty) can reduce or eliminate German tax – though this must be planned carefully.

Optimise timing when selling

If you plan to sell investments, consider:

  • Waiting until the next tax year if your income will be lower (for Günstigerprüfung).
  • Realising losses before year-end to offset gains.

Expat-specific scenarios (and what to do)

ScenarioWhat happensWhat you should do
You sell ETFs via a German brokerTax withheld automaticallyNo action needed, but keep your Steuerbescheinigung for your tax return.
You sell US stocks via a foreign brokerNo German withholdingReport income on Anlage KAP-INV. Claim credit for foreign tax under your DTA.
You hold crypto and sell after a yearTax-free gainKeep clear records of purchase/sale dates and values.
You move abroad before sellingUsually not taxable in GermanyEnsure you’re no longer resident when selling, check DTA to avoid double tax.
You own > 1 % of a company and leave GermanyExit tax possibleConsult a tax advisor early – EU/EEA moves may defer tax.

Other common pitfalls for expats

Even seasoned investors can stumble over these:

  • Assuming foreign brokers handle German tax: They don’t. You must declare these gains yourself.
  • Forgetting the Freistellungsauftrag: Without it, your first €1,000 gets taxed unnecessarily.
  • Overlooking loss offsets: You can’t combine losses between banks automatically – request a loss certificate in December if needed.
  • Ignoring ETFs’ partial exemptions: Choosing tax-efficient funds can make a real difference over time.
  • Neglecting to plan for moves abroad: Leaving Germany? Check residency status carefully: it determines who taxes your sale.

Capital gains tax for non-residents

If you live abroad but earn investment income from Germany, you’re considered beschränkt steuerpflichtig (limited tax liability). This means you only pay tax on income originating from Germany, such as:

  • Interest or dividends paid by a German bank
  • Gains from selling German company shares (in specific cases)

Under double taxation treaties (DTAs), you can reclaim part of that tax – sometimes reducing it to 15 % or less.

To reclaim, you’ll need to:

  1. Apply to the Bundeszentralamt für Steuern (BZSt).
  2. Provide a certificate of tax residency from your home country.
  3. Submit supporting documentation (e.g. dividend statements).

Unrealised capital gains – are they taxed?

No. Germany doesn’t capital gains tax on paper profits. If your stocks doubled in value this year but you haven’t sold them, you don’t owe a cent.

You’re only taxed once the gain is realised, i.e. when you actually sell the asset and the profit hits your account.

But there’s one major exception: If you move away from Germany permanently and you own at least 1 % of a company’s shares, the Exit Tax (Wegzugsbesteuerung) might kick in. This rule mostly targets business owners or founders, not small private investors with ETFs or minor shares.

It treats your shares as if they were sold the day you leave: taxing unrealised gains.

Long-term vs. short-term gains – does it matter?

No, not for financial investments. Germany scrapped this distinction in 2009 in the German income tax act (§ 32d EStG). Whether you hold a stock for two days or ten years, your gains are taxed the same: 25 %.

Why? The introduction of the Abgeltungsteuer replaced the old rule where holding an investment longer than a year made it tax-free. Since 2009, all gains are treated equally.

The exceptions:

  • Real estate: If you sell a property within 10 years of purchase, you pay your personal income tax rate on the gain. If you’ve lived in it yourself for the entire time (or at least the last two years), it’s tax-free.
  • Cryptocurrency: If you sell after holding for over one year, your gain is tax-free (for private investors, not businesses). If sold within a year, it’s taxed as regular income.

Capital gains tax on real-estate

When you sell property in Germany, any profit you make can be subject to a special capital gains tax known as Spekulationssteuer, literally, “speculation tax.” It’s designed to discourage short-term property flipping and applies mainly to private individuals, not businesses.

  • The 10-year rule: If you sell your property within 10 years of buying it, any gain is taxed as income at your personal tax rate. If you’ve owned it for more than 10 years, the sale is tax-free.
  • Main residence exception: If you lived in the property yourself for at least the year of sale and the two preceding years, you’re exempt, even if the 10-year period isn’t over.
  • What counts as capital gain: It’s the sale price minus purchase price and related costs (notary, agent fees, renovations, etc.).
  • Applies to foreign owners too: Even as a non-resident, you may owe Spekulationssteuer if the property is located in Germany. Double taxation treaties may reduce or offset this.
  • Rental properties: If you rented out the place and sell it before 10 years, expect to pay tax on the profit – and don’t forget depreciation rules that affect your cost basis.

Capital gains tax on crypto in Germany

In Germany, cryptocurrencies and digital assets are treated as private sales transactions under §23 Einkommensteuergesetz (EStG).

  • Tax-free if held for over 1 year, regardless of profit size.
  • Taxable if sold within 1 year and total annual gains from all private sales (e.g., crypto, gold, NFTs) exceed €600.
  • Tax rate: your personal income tax rate, not the flat 25% capital gains tax used for shares.
  • Staking or lending: extends the tax-free holding period to 10 years
  • Mining income is usually commercial and fully taxable.

You must declare crypto gains in your tax return under Anlage SO and keep detailed records (purchase/sale dates, EUR values, transaction fees, and wallet/exchange used), as no automatic reporting exists.

There’s no automatic exemption order (Freistellungsauftrag) for crypto; tax relief depends on holding periods and self-declaration.

FAQ – capital gains tax Germany

Do I pay tax on unrealised capital gains while living in Germany?

Short answer: No: Germany taxes realised gains (when you sell). Paper profits are not taxed while they remain unrealised.

Important exception: If you permanently leave Germany and you own ≥1% of a company, the exit tax (Wegzugsbesteuerung) can treat unrealised gains as if sold on the day you leave.

Is there a long-term vs short-term capital gains tax in Germany?

No. For stocks, ETFs and most financial investments there is no separate long-term tax rate. Since 2009 capital gains are generally taxed at the flat 25% rate (plus surcharges) regardless of holding period.

Notable exceptions:

  • Real estate: selling within 10 years can trigger income tax on the gain; owner-occupied sales are often exempt.
  • Crypto (private sales): gains are tax-free if held > 1 year (different rules if trading professionally).

If I use a foreign broker, does Germany automatically tax my capital gains?

No. Foreign brokers often do not withhold German Abgeltungsteuer automatically.

  • You must report foreign capital income on your German tax return (typically Anlage KAP-INV).
  • Keep transaction records and foreign tax certificates – foreign withholding may be creditable under a double taxation treaty.

What is the Günstigerprüfung and when should I use it?

The Günstigerprüfung lets the tax office compare the flat 25% rate with your personal progressive income tax rate. If your personal rate is lower, your capital income can be taxed more favourably and you get a refund.

Use it when:

  • Your total taxable income is low (e.g., part-year work, student, or early in your stay).
  • You had high capital income but little other income that year.

I’m moving mid-year – how does that affect capital gains tax?

Tax residency is the decisive factor. If you become non-resident before you realise gains, Germany typically won’t tax gains from foreign assets realised after your move. But:

  • If gains are German-source or you trigger exit-tax rules (e.g., ≥1% shareholding), Germany may still tax you.
  • Double taxation treaties and timing matter – plan the sale date and get proof of residency changes.
  • Consult a tax advisor before moving if you plan major disposals.

How do I report foreign withholding tax and claim credits in Germany?

If foreign tax was withheld on dividends or gains, you may be able to credit it against German tax under the relevant double taxation treaty.

Practical steps:

  • Request official withholding documentation from the foreign broker or payer.
  • Declare the income and foreign tax on Anlage KAP-INV.
  • Attach or reference the treaty clause if needed; consider a tax advisor for complex cases.

Are gains from selling my German rental property taxed the same as stock gains?

No property gains follow different rules. If you sell property within 10 years of purchase, the gain is usually taxed as income at your personal rate. If you lived in the property yourself for the full period (or in the year of sale + the two previous years), the gain is usually tax-free.

Capital gains tax Germany – sources and references

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