Taxes on capital gains from stocks

135 posts in this topic

On 10.12.2021, 13:01:23, Mario D said:

Hello all,

we are considering to return back to US, with my family in the first semester of 2022...

 

I would appreciate an advice, if somebody has experience with the following questions.

 

A little background beforehand: I will keep working in Germany until Mar 2022 and after that we are going back. In this case, I would change my Wohnsitz from Germany to US, as I expect to start a new position there. 

In this case I guess I would be considered beschränkt steuerpflichtig, as I am going to be under 183 days in Germany.

 

2. I have a depot here with stocks and ETFs, I am thinking to maintain this here. What is the tax that I have to pay in this case from profit and dividends? Is it still the 25% or does it change? I assume the freibetrag of 801 EUR does not apply anymore in this case, correct?

 

Any input appreciated!

Thanks!

 

just one thing about your ETFs - if they are German/European ETFs and not US-domiciled, the IRS will consider them to be PFICs and it will be a nightmare to declare your taxes in the US with these ETFs still in your portfolio.  You might want to get rid of them. Btw: did you report them in recent years when you declared your taxes with the IRS?

Cheerio

 

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On 10/12/2021, 13:01:23, Mario D said:

1. Is there any mimimum income under which I do not have to file German taxes? (Again Wohnsitz in the USA).

2. I have a depot here with stocks and ETFs, I am thinking to maintain this here. What is the tax that I have to pay in this case from profit and dividends? Is it still the 25% or does it change? I assume the freibetrag of 801 EUR does not apply anymore in this case, correct?

 

  1. No, your German tax return for the year 2022 will be mandatory. Up to the moment you move away, you will have unlimited tax liability in Germany, after your moving date only limited tax liability.
    In the German tax return, you will also have to declare your post-move US income, in Anlage WA-ESt.
    The post-move US income will not be taxed again, but it will raise your German income tax rate on your pre-move income, this is called "Progressionsvorbehalt". For details on the effect of "Progressionsvorbehalt", please read this entire section, including the "Progressionsvorbehalt" example.
     
  2. From the date you move away from Germany, your capital income will no longer be taxed by Germany, but by your new country of residence (though if you own German stocks, the yearly dividends will still subject to 15% German source tax). You just have to tell your German bank/broker your new US address, until you do, they will keep taxing your capital income with 26.375% Abgeltungsteuer + Soli (= 25% * 1.055).
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What happens if you forget to report a few hundred Euros of capitals gains over the 801 EUR tax-free threshold, and the Finanzamt discovers it after a few years? Are we talking about a fine or a criminal offense that stays in your Fuhrungszeugnis?

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At such a low evaded amount, the worst that can happen is a criminal fine at below 90 Tagessätze and it will therefore not appear in the Führungszeugnis (well, not unless you have  already received another crominal fine for another offense): https://www.juraforum.de/ratgeber/strafrecht/was-steht-im-fuehrungszeugnis-und-wie-lange

 

But you do know that you can have no criminal consequences at all if you come clean for the last 10 years, i.e. do a Selbstanzeige?: https://www.steuertipps.de/steuererklaerung-finanzamt/themen/selbstanzeige-das-wichtigste-in-kuerze#s-290677

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@PandaMunich - As a US citizen who has been living in Germany for the last few years, I have a few questions. 

 

I currently have an investment account in the US and my understanding from reading this thread and your amazing input is the following:

  1. Any capital gains from the US investment account over 801 EUR (Single) is taxed as 26.375% (No Church Tax) in Germany 
  2. The capital gains from the US investment account that is taxed in Germany can be included as part of the IRS US Foreign Earned Income Exclusion and not be taxed again unless you are over the threshold 
  3. File German taxes first, and then the US taxes - in that case, if the US capital gains are already declared in the German taxes, how would it be categorized when filing taxes with the IRS? 

After reading further and learning more about the Vorabpauschale - a tax in Germany for funds that is not sold, I have a feeling that I should hire an expert for this but the one's that were recommended in this forum said there's a waitlist. 

 

To flip this around, I received some stock options from my work in a Germany. When the stock vests and I decide to sell it, will the above scenario still play out or will the tax implications in the US be different? 

For example, if I receive 50 x 100 EUR (On January 1st, 2022) = 5,000 EUR in stock options that I decide to sell a year later on January 1st, 2023 when the stock has increased by 20% so 50 x 120 EUR = 6,000 EUR. Will I be taxed on the 1,000 EUR capital gain or the full 6,000 EUR amount since I never originally purchased the stock?

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6 hours ago, endsee said:

I currently have an investment account in the US and my understanding from reading this thread and your amazing input is the following:

  1. Any capital gains from the US investment account over 801 EUR (Single) is taxed as 26.375% (No Church Tax) in Germany 
  2. The capital gains from the US investment account that is taxed in Germany can be included as part of the IRS US Foreign Earned Income Exclusion and not be taxed again unless you are over the threshold 
  3. File German taxes first, and then the US taxes - in that case, if the US capital gains are already declared in the German taxes, how would it be categorized when filing taxes with the IRS? 

Since this is about your US tax return, please ask a CPA.

 

6 hours ago, endsee said:

To flip this around, I received some stock options from my work in a Germany. When the stock vests and I decide to sell it, will the above scenario still play out or will the tax implications in the US be different? 

If the vested stock options were "earned" for time worked in the US, i.e. if you moved from the US branch of your company to the German branch, that would be the "US part" of your vested stock options and the US have the taxation rights on them, i.e. they should be taxed by the US as employee income.

The "US part" of your vested stock options would only appear as income under Progressionsvorbehalt in your German tax return, i.e. they would not be taxed again by Germany, but would drive up your German income tax rate on your other income.

 

The part of the stock options "earned" for time worked in Germany would be the "German part" of your vested stock options and would be taxed as employee income by Germany.

 

6 hours ago, endsee said:

For example, if I receive 50 x 100 EUR (On January 1st, 2022) = 5,000 EUR in stock options that I decide to sell a year later on January 1st, 2023 when the stock has increased by 20% so 50 x 120 EUR = 6,000 EUR. Will I be taxed on the 1,000 EUR capital gain or the full 6,000 EUR amount since I never originally purchased the stock?

 

The 5,000€ would have already been taxed as employee income, so those 5,000€ would become your "purchase price".

--> 1,000€ profit that would be taxed (if you had already exceeded the 801€ savers' tax-free allowance for capital income) with 26.375%.

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Hello everyone.

 

First of all, a big "thank you" to the specialists who have been answering the questions asked here. 

 

I have two questions about the capital gains tax but with a little twist.

 

 

 

I am a married doctoral candidate living in Germany and recently started passive ETFs investing with Scalable Capital. I have applied for the 1602€ Freistellungsbetrag. Our investment plan is long term (at least 15 years) and we are not interested in short-term/day trading so the majority of our ETF choices are accumulating types. 

 

Will our portfolio be taxed for profits made by the ETFs we have even if the fund is lying there in the account passively?

 

The second question with a twist is as follows:

 

Thankfully, we are receiving Kindergeld support for our little girl and we intend to set up a long term ETFs investment account for her to invest 50% of the Kindergeld on a monthly basis. We thought to set up the investment account with Commerzbank since both myself and my wife each have an account with them. However, looking closely at fees, etc., we realised that Commerzbank will be "fairly" expensive in the long run. We are now thinking that my wife should simply open a brokerage account (with Scalable Capital or Flatex) in her name (of course the funds invested here will be strictly for our daughter). The question therefore is, will capital gains tax still apply onto this (other) account even though the intention is to go on with passive investment? Will we likely run into problems with the Finanzamt because of her Steuernummer appearing on a second brokerage account, despite that we have used it to apply for the 1602€ allowance in our scalable capital account?

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On 12/30/2021, 9:13:17, aquilaJenaer said:

 

Will our portfolio be taxed for profits made by the ETFs we have even if the fund is lying there in the account passively?

 

 

 

No, you will only be taxed on realised gains, i.e. dividends (if you only have accumulating ETFs, there shouldn't be any) and profits made after selling the ETFs. So, no taxation if you don't sell your ETFs.

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On 30/12/2021, 21:13:17, aquilaJenaer said:

Our investment plan is long term (at least 15 years) and we are not interested in short-term/day trading so the majority of our ETF choices are accumulating types. 

 

Will our portfolio be taxed for profits made by the ETFs we have even if the fund is lying there in the account passively?

Yes, Scalable Capital being a German broker will calculate the Vorabpauschale (= fictive profit) and make you tax it: 

 

On 30/12/2021, 21:13:17, aquilaJenaer said:

Thankfully, we are receiving Kindergeld support for our little girl and we intend to set up a long term ETFs investment account for her to invest 50% of the Kindergeld on a monthly basis. We thought to set up the investment account with Commerzbank since both myself and my wife each have an account with them. However, looking closely at fees, etc., we realised that Commerzbank will be "fairly" expensive in the long run. We are now thinking that my wife should simply open a brokerage account (with Scalable Capital or Flatex) in her name (of course the funds invested here will be strictly for our daughter). The question therefore is, will capital gains tax still apply onto this (other) account even though the intention is to go on with passive investment? Will we likely run into problems with the Finanzamt because of her Steuernummer appearing on a second brokerage account, despite that we have used it to apply for the 1602€ allowance in our scalable capital account?

Yes, you need to open an account in your daughter's name, with your daughter's Steueriditifikationsnummer and she will them get her own 801€ saver's tax-free allowance once you file the Freistellungsauftrag at the broker for her, in her name.

These accounts are called Kinderkonto/depot.

 

See here for how to open a Kinderkonto at Scalable Capital: https://de.scalable.capital/en/kinderkonto

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16 hours ago, PandaMunich said:

Yes, you need to open an account in your daughter's name, with your daughter's Steueriditifikationsnummer and she will them get her own 801€ saver's tax-free allowance once you file the Freistellungsauftrag at the broker for her, in her name.

Once her income/profits exceeds those € 801 you can also apply for a "Freistellungsbescheinigung" (IIRC that´s how it´s called) from your Finanzamt and the complete Grundfreibetrag (I think currently around € 9000) will be exempt from withholding once you submit it to her bank. At least it used to be like that before 2018.

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I am interested in purchasing shares and receiving dividend income to move away from 100% earned income and have at least some passive income. If I take a look at top yielding dividend stocks (https://www.reinisfischer.com/top-30-dividend-paying-stocks-germany-dax-index) in Germany the yield is around 4.5% on average.

 

Income from dividends in Germany is taxed at 25%. I want to have a simple tax statement I can provide to my tax advisor which shows bought/sold and tax due/collected, as well as dividend income received and tax due/collected. I am not sure if the broker deducts tax automatically of if this is done at the end of the year with the tax return. Either is fine for me.

 

As well as the German stock market, I'd be interested in dividend paying shares on the UK and US stock market. Generally I'd be looking to buy and accumulate stocks, in small quantities over the next 10 years or so, to build up the overall dividend pay-out.

 

I need an English app/login so looked around for accounts. I found Scalable Capital , Trade Republic and Capital.com online sites. The first two seem to be German based and the last one UK based. Can anyone recommend one of these or perhaps there is another one I should consider?

 

 

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I started using Scalable Capital about six months ago, and it does exactly what it says on the tin (cheap and easy platform). It seems to have been created for the German market, which makes matters easy for your local accountant. I'm not sure whether they run an English language version, but the German one is very user-friendly. Overall, a simple and cheap way to invest in ETFs, and stocks listed on the Munich exchange.

 

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5 hours ago, scook17 said:

the yield is around 4.5% on average.

Someone correct me if I'm wrong, but I think you got the wrong tense. 

You never know how much the yield "is", you know at best how much the yield "was". And you probably should not look at it anyway.

 

 

5 hours ago, scook17 said:

I need an English app/login so looked around for accounts. I found Scalable Capital , Trade Republic and Capital.com online sites. The first two seem to be German based and the last one UK based. Can anyone recommend one of these or perhaps there is another one I should consider?

 

 

I'm on Trade Republic and I don't see how it could be even better. They charge nothing when you buy ETFs (I think at the time it was the only broker that charge ZERO for buy ETF). And I could do the whole opening process (including of course the Identifizierung, with them looking at my (non German) passport, without having to leave my living room). You can set the language to English. I even emailed the support guys, in English, they replied immediately, in English. Having said that, you better learn German to the level you are 100% comfortable in doing everything banking in German.

 

 

 

 

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20 hours ago, dstanners said:

I started using Scalable Capital about six months ago, and it does exactly what it says on the tin (cheap and easy platform). It seems to have been created for the German market, which makes matters easy for your local accountant. I'm not sure whether they run an English language version, but the German one is very user-friendly. Overall, a simple and cheap way to invest in ETFs, and stocks listed on the Munich exchange.

 

 

Scalable Capital is also available in English, just change it in your personal settings. 

 

I recommend Scalable Capital for ETF investing. They have the biggest selection of ETFs for savings plans, without fees.

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Hi all,

 

I'm wondering if there has been any update to the below change to the income tax law (passed in December 2019) aside from the change that allows for the amount to be 20k EUR instead of 10k EUR.

 

§ 20 Abs. 2 S. 1 Nr. 3 are all futures, forwards, options, usw.  So if you happen to have substantial losses arising from derivatives your ability to offset other capital gains/income is capped fairly low now.

 

I'm wondering if there are any pending changes or court cases.  

 

Thanks in advance.

 

 

1. Nach § 20 Absatz 6 Satz 4 werden die folgenden

Sätze eingefügt:

„Verluste aus Kapitalvermögen im Sinne des Absatzes

2 Satz 1 Nummer 3 dürfen nur in Höhe von

10 000 Euro mit Gewinnen im Sinne des Absatzes 2

Satz 1 Nummer 3 und mit Einkünften im Sinne des

§ 20 Absatz 1 Nummer 11 ausgeglichen werden; die

Sätze 2 und 3 gelten sinngemäß mit der Maßgabe,

dass nicht verrechnete Verluste je Folgejahr nur bis

zur Höhe von 10 000 Euro mit Gewinnen im Sinne

des Absatzes 2 Satz 1 Nummer 3 und mit Einkünften

im Sinne des § 20 Absatz 1 Nummer 11 verrechnet

werden dürfen. Verluste aus Kapitalvermögen aus

der ganzen oder teilweisen Uneinbringlichkeit einer

Kapitalforderung, aus der Ausbuchung wertloser

Wirtschaftsgüter im Sinne des Absatzes 1, aus der

Übertragung wertloser Wirtschaftsgüter im Sinne

des Absatzes 1 auf einen Dritten oder aus einem

sonstigen Ausfall von Wirtschaftsgütern im Sinne

des Absatzes 1 dürfen nur in Höhe von 10 000 Euro

mit Einkünften aus Kapitalvermögen ausgeglichen

werden; die Sätze 2 und 3 gelten sinngemäß mit

der Maßgabe, dass nicht verrechnete Verluste je

Folgejahr nur bis zur Höhe von 10 000 Euro mit Einkünften

aus Kapitalvermögen verrechnet werden

dürfen.“

 

2. Dem § 52 Absatz 28 werden die folgenden Sätze

angefügt:

 

㤠20 Absatz 6 Satz 5 in der Fassung des Artikels 5

des Gesetzes vom 21. Dezember 2019 (BGBl. I

S. 2875) ist auf Verluste anzuwenden, die nach

dem 31. Dezember 2020 entstehen. § 20 Absatz 6

Satz 6 in der Fassung des Artikels 5 des Gesetzes

vom 21. Dezember 2019 (BGBl. I S. 2875) ist auf

Verluste anzuwenden...

 

 

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