Capital gains tax is a special form of levying income and corporation tax. In Germany, capital income is not taxed at the personal tax rate but at a flat rate of 25 percent. This includes, in particular,
profits from the sale of shares.
This capital gains tax is automatically deducted by the bank from which the capital income was earned. As the purpose of the tax deduction is to compensate, the capital gains tax is often referred to synonymously as the flat rate withholding tax.
If you do not have a domicile or habitual residence in Germany, a refund of the income tax paid is usually considered. A refund may therefore be relevant for you if you do not live in Germany but hold shares with a German bank or broker.
The decisive factor is always whether Germany has concluded a double taxation agreement with the state in which the taxpayer lives (the so-called state of residence) and in which state the investment income is taxed in accordance with the agreement.
The most common conditions for reimbursement are:
|The bank withheld capital gains tax on the dividend of a German company||As a rule, Germany may withhold a maximum tax of 15 percent. The excess amount (usually 10 percent) can be refunded as excess capital gains tax withheld.|
|The bank withheld capital gains tax on the dividend of a non-German company||Germany has no right of taxation, therefore a complete refund of the capital gains tax withheld is possible.|
|The bank withheld capital gains tax on profits from a sale of shares||In this case, the right of taxation is usually only extended to the state of residence of the taxpayer. The entire 25 percent must be reimbursed.|
In the case of capital gains tax wrongly withheld, the German tax authorities will only refund the excess tax paid upon request. Depending on the circumstances, you must submit this request to the Federal Central Tax Office or the tax office to which the bank has paid the capital gains tax.
We will gladly submit the request for you and assume the correspondence with the tax authorities. In order for us to successfully request a refund of capital gains tax on your behalf, we only need a few documents from you:
- the tax certificate of the bank that paid the capital gains tax to the tax office,
- proof of your tax residence (Certificate of Tax Residence),
- a statement of income, if available.
If you wish, we can also submit several requests directly for all your investment income.
In order to prevent the withholding of tax in the future, there is also the option of an exemption from capital gains tax. In this case, banks will no longer withhold excessive amounts of tax in the future. We will gladly advise you on this subject as well and, if necessary, submit a request for you.
Learn more about German income and corporate income taxation:
We are proud authors of the German chapters of the renowned LexisNexis Matthew Bender publication “Foreign Tax and Trade Briefs”, which covers the latest tax information for 128 countries including Germany. You can order your copy on www.lexisnexis.com.
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