Capital gains tax in Germany

German capital gains tax framework

Germany operates a dual-framework approach to capital gains under the Einkommensteuergesetz (EStG):

• Abgeltungssteuer under §32d EStG: Final withholding tax at 25% on most CAPITAL INCOME (Kapitalerträge) — dividends, interest, fund distributions, capital gains on securities.
• §23 EStG private-disposal regime: Progressive marginal-rate taxation on private-disposal transactions (Spekulationsgeschäfte) — real estate (10-year holding period), crypto (1-year holding period), other private movable assets (1-year holding period).

The dual framework means German residents face materially different tax outcomes depending on asset category:

• Short-term securities disposals (any holding period): 25% Abgeltungssteuer + Soli + Kirche = ~26.375% to ~28%.
• Long-term real estate held >10 years: 0% (fully exempt).
• Long-term crypto held >1 year: 0% (fully exempt — uniquely favourable globally).
• Short-term crypto disposals (within 1 year): progressive marginal rate up to 45% + Soli + Kirche = up to ~50%.
• Short-term real estate disposals (within 10 years): progressive marginal rate up to 45% + Soli + Kirche = up to ~50%.

Germany's crypto 1-year holding exemption is one of the most generous in the developed-economy peer set — making Germany a notable jurisdiction for long-term crypto investors.

Abgeltungssteuer — the 25% flat withholding

Abgeltungssteuer under §32d EStG (introduced 1 January 2009) is the principal capital-income tax in Germany:

• Rate: 25% flat on capital income.
• Plus 5.5% Solidaritätszuschlag: Applied to the Abgeltungssteuer (NOT to the underlying capital income) = 25% × 1.055 = 26.375% effective.
• Plus 8-9% Kirchensteuer: If applicable to the filer's religious community status — effectively 27.99% combined (Bavaria/Baden-Württemberg 8% church) or 27.819% (other Länder 9%).
• Withholding at source by German banks: KapESt (Kapitalertragsteuer) withheld automatically. The filer receives net amount.
• Capital income categories: Dividends from German and foreign companies, interest from savings accounts and bonds, fund distributions, capital gains on disposal of securities, certain derivative income.

Sparer-Pauschbetrag (saver's allowance):

• €1,000 per individual per year (€2,000 joint married) — raised from €801/€1,602 in 2023.
• Applied via Freistellungsauftrag (exemption order) submitted to the bank.
• The bank withholds Abgeltungssteuer only on capital income above the allowance.
• Multiple banks: filers can split the allowance across institutions but cannot exceed the total.

Günstigerprüfung under §32d(6) EStG:

• Optional election for filers whose marginal income tax rate is below 25%.
• Election made via Anlage KAP (capital income annex) in the annual Einkommensteuererklärung.
• The capital income is added to total taxable income and taxed at the personal marginal rate — typically only beneficial for low-earner pensioners or partial-year residents.

For a German-resident individual receiving €10,000 of dividend income above the Sparer-Pauschbetrag:

• Abgeltungssteuer 25%: €2,500.
• Solidaritätszuschlag 5.5% × €2,500: €138.
• Kirchensteuer 9% × €2,500 (if applicable): €225.
• Total tax: €2,500 + €138 + €225 = €2,863 (28.6% effective with church) or €2,638 (26.4% without church).
• Net dividend received: €7,137 to €7,362 depending on church-tax status.

§23 EStG private-disposal regime

Section 23 of the Einkommensteuergesetz governs PRIVATE-DISPOSAL transactions (Spekulationsgeschäfte) of non-securities assets:

Real estate (Grundstücke):

• Holding period: 10 years.
• Within 10 years: Capital gain taxable at filer's progressive marginal rate (up to 45% + Soli + Kirche).
• After 10 years: Fully exempt from income tax. No CGT at all on long-term real estate.
• Owner-occupied residence exemption: Regardless of holding period, owner-occupied residence is EXEMPT if used by the owner in the year of sale plus the two prior calendar years ('eigene Wohnzwecke' under §23(1) Nr. 1 EStG). Partial use produces partial exemption.
• Annual exemption: €600 per year (€1,000 from 2024) for total private-disposal gains.

For a German resident selling investment property within 10 years (purchase €400,000, sale €600,000):

• Capital gain: €200,000.
• Less annual exemption: -€1,000.
• Taxable: €199,000 added to taxable income at marginal rates (up to 45%).
• Tax at top marginal: €89,550 + Soli + Kirche.

For the same property sold AFTER 10 years: €0 tax (fully exempt).

The 10-year holding period creates a meaningful incentive for long-term real-estate hold strategies in Germany. Comparison with peer jurisdictions:

• United States: CGT applies regardless of holding period (preferential rates for long-term).
• United Kingdom: CGT applies regardless of holding period.
• Australia: 50% CGT discount after 12 months.
• France: Progressive abatement reaching full exemption after 22 years (real estate) / 30 years (social contributions).
• Germany: Full exemption after 10 years — one of the most generous structures globally for real-estate long-term hold.

Cryptocurrency and other private movable assets under §23(1) Nr. 2 EStG:

• Holding period: 1 year (Spekulationsfrist).
• Within 1 year: Capital gain taxable at filer's progressive marginal rate.
• After 1 year: Fully exempt — uniquely favourable for long-term crypto investors.
• Annual exemption: €1,000 per year (raised from €600 in 2024) for total private-disposal gains.

See Germany crypto taxation for fuller crypto-specific analysis.

Owner-occupied residence exemption

The owner-occupied residence exemption under §23(1) Nr. 1 EStG is the principal residential-CGT shelter in Germany:

• Eligibility: Property used by the owner for residence in the year of sale AND in the two preceding calendar years. So a 2025 sale qualifies if the property was used as owner-occupied residence in 2023, 2024, AND part of 2025.
• 'Eigene Wohnzwecke' test: Must be the owner's actual residence — not rented out or used for trade.
• Partial use: Where the property was partly used for trade or rental, the exemption is apportioned. For example, if 30% of floor area was used as home office, 70% is exempt.
• Multiple residences: A filer can have ONE main residence at any time. Secondary residences (Ferienwohnungen) typically don't qualify for the exemption.

The '2 prior calendar years + year of sale' framework means short-term ownership of a primary residence CAN qualify — as little as 18 months total ownership (start of year N-2 through partial year N) can suffice. Material strategic flexibility for filers planning short-to-medium-term residential disposals.

Business-asset capital gains

For assets held in BUSINESS PROPERTY (Betriebsvermögen) rather than private property, different treatment applies:

• Standard income tax: Business-asset capital gains taxed at filer's progressive marginal rate as ordinary business income — Abgeltungssteuer does NOT apply.
• §16 EStG business disposal: Disposal of an entire business (Betriebsveräußerung) — preferential treatment under §34 EStG 'Fünftelregelung' (one-fifth rule averaging the gain over 5 years for marginal-rate calculation).
• §34 EStG retirement carve-out: For business owners aged 55+ disposing of business, a reduced rate of 56% of average personal tax rate applies (with €45,000 allowance).
• §6b EStG roll-over: Tax-deferred roll-over for reinvestment of disposal proceeds into qualifying replacement business property within 4 years.

These business-asset provisions provide meaningful Mittelstand business-succession flexibility — particularly the §34 retirement carve-out and §6b roll-over.

See Germany small business tax for fuller business-asset framework analysis.

Investmentfonds and Vorabpauschale

From the 2018 Investment Tax Reform Act, German investment funds operate under a complex opaque taxation framework:

• Vorabpauschale (notional minimum return): Each year, the fund declares a notional minimum return at the base interest rate × 70%. The Vorabpauschale × applicable partial-exemption rate is included in investor income — even if no distribution occurred.
• Partial-exemption rates by fund type:
• Equity funds (≥51% equity): 30% partial exemption (only 70% of returns are taxable).
• Real-estate funds (≥51% real estate): 60% partial exemption (40% taxable). 80% for global real-estate funds.
• Mixed funds (≥25% equity): 15% partial exemption.
• Bond funds and other: 0% partial exemption.
• At disposal: Capital gain calculated as proceeds minus historical cost MINUS cumulative Vorabpauschale previously taxed.

The Vorabpauschale + partial-exemption framework substantially changed German fund taxation from the prior fully-transparent regime. Equity funds remain relatively favourably treated (30% partial exemption); bond funds face the full Abgeltungssteuer without exemption.

Non-residents and German-source capital gains

Non-resident treatment under §49 EStG:

• German real estate: Capital gains taxable in Germany at progressive rates (no Abgeltungssteuer for non-residents). Treaty provisions typically preserve German taxing rights on real-estate gains.
• German shares — substantial holdings: Non-resident shareholders with ≥1% shareholding face German tax on capital gains.
• German shares — non-substantial holdings: Generally not taxed in Germany for non-residents (subject to treaty).
• German bank interest: Non-residents typically not taxed unless source-specific provisions apply.
• Withholding on dividends: 25% Abgeltungssteuer applies to non-residents on German dividend payments, reduced via treaty.

See Germany tax-treaty-relief for treaty reductions.

Capital losses and loss usage

German capital-loss rules are notably restrictive:

• Losses from securities: Offset only against capital gains from securities (not against other capital income like interest or dividends). Carry-forward indefinitely against future securities gains only.
• Losses from §23 EStG private-disposal: Offset only against other §23 EStG gains. Carry-forward indefinitely.
• Crypto losses within 1-year holding period: Offset against other §23 EStG private-disposal gains. No direct offset against other income.
• Real-estate losses within 10-year holding period: Same §23 EStG treatment.

The ring-fencing of losses to their own asset category is materially more restrictive than peer jurisdictions where losses generally offset across capital categories.

For practitioners managing US-side reporting for German residents holding US assets (Form 1099-B for US-broker accounts, Form 8938 FATCA, FBAR FinCEN 114), Tax1099 handles US 1099 issuance. EUR-USD foreign-currency banking for cross-border investment routes through WorldFirst.

Compliance via Anlage KAP and Anlage SO

Capital gains compliance follows the standard German self-assessment framework:

• Anlage KAP: Capital income (dividends, interest, fund distributions, securities gains) — reports Abgeltungssteuer income, claims Sparer-Pauschbetrag, applies Günstigerprüfung election if beneficial.
• Anlage SO (Sonstige Einkünfte): Other income including §23 EStG private-disposal gains (real estate, crypto, other private movable assets within holding period).
• Anlage V: Vermietung und Verpachtung — for rental income from real estate.
• Anlage G: For business-asset gains (Gewerbebetrieb).
• Filing: Via Elster online portal. Deadline 31 July of following year (or end-February of second-following year with Steuerberater).

Loss-carry-forward declaration (Verlustfeststellung): Annual procedure to declare and preserve unused losses for future offset. Required even where no current-year taxable gain offset is sought.

For the broader German tax stack, see the Germany country overview, Germany self-employed tax for sole-proprietor and Freiberufler analysis, Germany small business tax for business-asset capital gains and §16 EStG business disposals, Germany crypto taxation for the 1-year crypto holding exemption, Germany dividend-and-investment-tax for Abgeltungssteuer on dividend income, and the Capital gains tax topic hub for cross-jurisdiction comparison. To find a Steuerberater (the German qualified tax professional designation) registered with the Steuerberaterkammer, browse the Germany tax-pros directory.