ETF tax in Germany 2026: what the state takes, on one page

Is this page for you?#

This page is about one country: Germany. German ETF tax isn’t hard. It’s tedious, which is worse, and the law hides that behind words like Vorabpauschale so you’ll pay someone to explain it. Don’t. You need five numbers and one formula.

You’re tax resident in Germany and hold ETFs in a private account at a German bank or broker? Then yes. All figures are for the tax year 2026.

Broker abroad? Same rules, but nobody withholds the tax for you. You get to do the state’s paperwork yourself and declare everything in your tax return. Lucky you.

Not in Germany? Then this page is a worked example, not your rulebook. The questions are the same in every country: what’s the tax rate on capital income, is there a yearly allowance, are accumulating funds taxed while you hold them or only when you sell, and does your broker withhold the tax or do you declare it yourself? The answers are at your national tax authority. The general setup is in Investing in Europe.

The five numbers you need#

Item	Value 2026	Where it is written
Flat tax (Abgeltungsteuer)	25%	§ 32d EStG
Solidarity surcharge	5.5% of the tax	§ 4 SolzG
Saver’s allowance (Sparer-Pauschbetrag)	€1,000, couples €2,000	§ 20 Abs. 9 EStG
Partial exemption, equity funds	30%	§ 20 InvStG
Base rate for the advance lump sum	3.20%	BMF, 13 January 2026

25% plus 5.5% of 25% makes 26.375%. Three decimal places. If the state spent your money as precisely as it collects it, this would be a shorter blog.

Church members pay church tax on top: 8% of the tax in Bavaria and Baden-Württemberg, 9% in the other states. In return the flat tax itself shrinks a little, because the law uses the formula income ÷ (4 + church tax rate). With 9% that gives a flat tax of about 24.45%. Yes, somebody sat down and designed that.

Partial exemption: 30% off, no coupon needed#

When is a fund an equity fund? When it continuously holds more than half of its assets in shares. A plain MSCI World or FTSE All-World ETF does.

For those funds, 30% of all income is tax-free for private investors: distributions, advance lump sums and gains from selling. Don’t mistake it for generosity. It’s a lump-sum compensation for taxes the fund has already paid, such as withholding taxes abroad.

Effective rate: 26.375% × 70% = about 18.46%.

Mixed funds get 15%. Pure bond ETFs get nothing.

The allowance and the form that switches it on#

The saver’s allowance is €1,000 per person per year. It covers all capital income together: interest, dividends, fund income, gains.

But it doesn’t switch itself on. You give your bank an exemption order (Freistellungsauftrag). Several banks? Then you split the €1,000 between them.

And without an order? The bank withholds tax from the first euro, and you only get it back through your tax return. So the money isn’t lost. It’s just on holiday at the tax office for a while.

The advance lump sum (Vorabpauschale)#

Accumulating funds pay out nothing. And the state is not a patient investor. It won’t wait decades for its share, so it taxes a small fictional return every year. Taxing money you haven’t received yet: you have to admire the creativity. Think of it as a prepayment on the tax you’ll owe when you sell.

The formula from § 18 InvStG:

Base return = value of your units at the start of the year × base rate × 70%
The base return is capped at the fund’s actual gain in that year, including distributions
Advance lump sum = base return minus distributions of that year, never below zero

Fund ends the year lower than it started? Then the advance lump sum is zero. Bought during the year? It’s reduced by one twelfth for every full month before the month of purchase.

The Bundesfinanzministerium publishes the base rate every January. For 2026 it’s 3.20%. Now the odd part: the advance lump sum for 2026 counts as received on the first working day of the following year, 4 January 2027. So it eats into your allowance for 2027.

Guess first

An accumulating equity ETF worth €10,000, held all year, allowance used up. How much tax does the advance lump sum cost you for 2026?

The answer: 41.36 €. About 0.41% of the position, and only in a year with enough gains. It’s a prepayment: every euro comes off your gain when you sell.

The bank takes the tax from your cash account in January. Nothing gets sold. So keep a little cash there at the start of the year.

Distributing ETFs are covered too. If the payouts of a year are at least as high as the base return, the advance lump sum is zero. If they’re lower, only the difference is taxed.

Selling: first in, first out#

Sell part of a position and the law assumes that the units you bought first are sold first (FIFO, § 20 Abs. 4 EStG). In a long-running savings plan these are usually the units with the largest gains. Convenient. For the tax office.

The gain is the sale price minus the purchase price minus costs. Then the advance lump sums that were applied during your holding period come off, in full. After that comes the 30% partial exemption.

Guess first

You sell an equity ETF with a €6,000 gain, single, allowance untouched. What share of the gain goes to the tax office?

The answer: 13.4%. The headline rate is 26.375%. Partial exemption, allowance and the advance lump sums you already paid tax on bring it down to about half.

Losses: two pots, because one would’ve been too easy#

Your bank offsets losses against gains within the same calendar year automatically. What’s left is carried into the next year at the same bank.

Now the two pots. Losses from selling single shares can only be offset against gains from selling shares. Everything else goes into the general pot. ETF units are fund units, not shares, so ETF losses land in the general pot and can be offset against interest, dividends and fund gains.

Can you use losses from capital income to reduce the tax on your salary? No. Nice try. The state loves sharing your gains. Your losses stay in their pot.

And if you have a loss at one bank and gains at another, the banks don’t talk to each other. You can ask the bank with the loss for a loss certificate until 15 December of the running year and settle it in your tax return.

The cheaper-rate check (Günstigerprüfung)#

Is your personal income tax rate below 25%? Then you can apply in your tax return to have your capital income taxed at your personal rate instead. The tax office calculates both ways and uses the cheaper one. No joke, it does that.

That’s relevant for students, part-time workers and some retirees. With a full-time salary it rarely helps.

So what do you do with all that?#

Three things.

File the exemption order. Two minutes of work, worth up to €263.75 a year per person (€1,000 × 26.375%), and you don’t have to chase it through the tax return.
Don’t let the tax tail wag the dog. Costs, diversification and staying invested matter more than the last tax trick.
Plan with after-tax numbers. A portfolio of €500,000 with €250,000 of gains isn’t worth €500,000 in cash. The tax office is your silent partner. It put in nothing, and it still gets its cut. It just hasn’t collected yet.

You can model the effect of taxes and time with the calculator. Returns in the calculator are assumptions. Past returns are not a promise.

How accumulating and distributing funds compare in practice is in Accumulating or distributing ETFs. Just starting? Read Investing in Europe first. Level 5 of the course, Don’t break it, puts tax next to the two other portfolio killers: crashes and your own brain.

This article is education, not tax advice. It covers the standard case. For special cases, ask a tax adviser.

Sources#

Education, not advice. I don’t know your situation, and past returns promise nothing. Check my numbers, then make your own call. You’re a grown-up.