Question 1

How are capital gains on shares and crypto taxed in Germany?

Accepted Answer

Germany taxes investment income including dividends, interest, and capital gains from shares under Abgeltungsteuer (withholding tax / flat capital gains tax) at a flat rate of 25% plus the Solidaritätszuschlag and Kirchensteuer if applicable, bringing the effective rate to around 26.375% (or slightly higher with church tax).

This flat tax is withheld directly by German banks and brokers when you sell shares or receive dividends. You do not need to declare it separately on your return unless you

Question 2

What is the Freistellungsauftrag and how does it work in Germany?

Accepted Answer

The Freistellungsauftrag (tax exemption order) instructs your bank or broker not to withhold Abgeltungsteuer on your investment income up to the SparerPauschbetrag (saver's allowance). For 2024, this allowance is €1,000 per person (€2,000 for jointly assessed couples).

You submit a Freistellungsauftrag to each financial institution where you hold investments. You can split the €1,000 allowance across multiple banks, but the total across all institutions cannot exceed €1,000. If you do not submi

Question 3

How is rental income taxed in Germany?

Accepted Answer

Rental income in Germany (Einkünfte aus Vermietung und Verpachtung) is taxed as ordinary income at your personal marginal income tax rate, not at the flat Abgeltungsteuer rate. You declare it in Anlage V of your Steuererklärung.

Allowable deductions against rental income include: mortgage interest, property management fees, maintenance and repair costs, insurance premiums, property taxes (Grundsteuer), administrative costs, depreciation (Abschreibung / AfA), and advertising costs to find tenant

Question 4

How does German inheritance tax (Erbschaftsteuer) work?

Accepted Answer

Erbschaftsteuer (inheritance tax) and Schenkungsteuer (gift tax) are governed by the same law in Germany and apply to transfers of wealth both on death and during lifetime. The heir or gift recipient is liable for the tax.

Taxfree allowances (Freibeträge) apply per recipient per 10year period: €500,000 for spouses and registered partners, €400,000 for children (per parent, so €800,000 from both parents combined), €200,000 for grandchildren, €20,000 for siblings and other more distant relatives.

Question 5

What is the Abgeltungsteuer (capital gains withholding tax) in Germany?

Accepted Answer

Abgeltungsteuer is Germany's flatrate withholding tax on investment income, introduced in 2009. It applies to interest, dividends, and capital gains from the sale of financial assets such as shares, bonds, and funds. The rate is a flat 25%, to which the Solidaritätszuschlag (5.5% of the tax) is added, bringing the total to approximately 26.375%. Church tax members pay slightly more.

The key feature is that this tax is withheld directly at source by German banks and brokers, so in most cases you

Question 6

What is the Wegzugsbesteuerung (exit tax) when leaving Germany?

Accepted Answer

Wegzugsbesteuerung is an exit tax triggered when a German tax resident who holds at least a 1% stake in a corporation (GmbH, AG, or foreign equivalent) moves abroad and ceases to be a German tax resident. Under §6 AStG, Germany treats the shares as if they were sold at market value on the date of departure and taxes any unrealised gain as income.

The purpose is to tax capital gains that accrued during German residency before the taxpayer moves to a jurisdiction where Germany can no longer colle

Question 7

What are the German tax rules for cryptocurrency?

Accepted Answer

Germany treats cryptocurrencies as private assets (Wirtschaftsgut) rather than currency or securities. Gains from selling, swapping, or spending crypto are treated as private sales transactions under §23 EStG and are subject to income tax at your personal marginal rate, not at the flat Abgeltungsteuer rate.

The critical holding period rule: if you hold crypto for more than one year, any gain on disposal is completely taxfree. If you hold for one year or less, the gain is taxable. A swap between

Question 8

How are employee share options and stock grants taxed in Germany?

Accepted Answer

Germany taxes employee share options and restricted stock units (RSUs) as employment income (Arbeitslohn) at the time they are exercised or vest, not when the shares are later sold. The taxable amount is the market value of the shares at exercise or vesting minus any price paid by the employee. This gain is added to salary and subject to Lohnsteuer, Solidaritätszuschlag, and social security contributions at the standard employment income rates.

For example, if an employee exercises options to b

Question 9

What expenses can landlords deduct from rental income in Germany?

Accepted Answer

German landlords can deduct a wide range of expenses from rental income (Einkünfte aus Vermietung und Verpachtung) to reduce their taxable profit. The key categories of deductible expenses are set out in §9 EStG and applied in Anlage V of the Steuererklärung.

Deductible costs include: mortgage interest (Schuldzinsen) on loans used to purchase or improve the property, property management fees (Hausverwaltungskosten), maintenance and repair costs (Reparaturen und Instandhaltung), insurance premiu

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