Taxation of Stock gains

[Frantic 72]

Hi,

 

I know about capital gain taxation. In my home country Bank or the Intermediation Provider takes care to deduct and pay for me this taxes on each gain. To make it short, you don't need to fill paper and do complicated or boring stuff.

Is the same also in Germany or I should declare in detail all gains in the annual tax form ? 

 

 

Also, are losses put in a kind of pool as a compensation for capital gain taxation ? I mean, if I make 100 euro loss and afterwards  I make a 100 euro gain for which I have to pay 25 euro tax (just an example), then i will not pay 25 euro tax and my "loss pool" will decrease from 100 euro to 75 euro. Is this in place in Germany ?

[Frantic 72]

just to add further info, of course my fiscal/tax residence is now in Germany. 

[PandaMunich 16,869]

It's the same here, but only for shares held in depots at German banks.

 

So if you kept your share depot in your home country bank, then you should tell your home country bank that you are resident in Germany so that they do not deduct your home country income tax (or at least only deduct a reduced source tax, the exact proceeding depends on the double taxation agreement between Germany and your home country).

You will then have to declare all foreign (= not held in a German bank) capital income in Anlage KAP in your yearly tax return. The tax return, which covers the previous calendar year, has to be submitted by 31. May.

The capital income will then be taxed with 26.375% (= 25% + 5.5%*25% Soli), or with your personal tax rate if that is lower than 26.375%.

Details in the TT Elster wiki: http://www.toytowngermany.com/wiki/ELSTER

 

Yes, we also have a loss pool, this is a separate pool just for sales of shares, i.e. you cannot compensate a loss from selling shares with income from dividends, only with another profit from selling shares.

 

[Frantic 72]

4 hours ago, PandaMunich said:

It's the same here, but only for shares held in depots at German banks.

 

 

 

Yes actually I have no stock in my home country, but I would start here in Germany. Sorry for the doublecheking, but so in this case the Bank will made all the tax stuff for me, right ?

 

By the way, I see here that commissions for stock buying and selling are quite high 

 

 

 

 

 

[PandaMunich 16,869]

Yes.

 

Regarding brokerage fees, have a look at this price comparison: http://www.modern-banking.de/vergleich-brokerage-2.php

[Frantic 72]

I bump up this thread for a, hopefully, last clarification.

 

The German broker/bank will deduct  automatically ,ALL taxes for each gainful operation ? I mean, also solidarity and Church (   ) tax ?

or for the last one I should fill information in the annual tax declaration ? 

[PandaMunich 16,869]

Yes, since 2015 a German bank/broker will deduct all taxes, including church tax, that are due: http://www.derwesten.de/wirtschaft/kirchensteuer-auf-zinsertraege-ist-ab-2015-gesetzliche-pflicht-id8813237.html

 

Before, you could deny your bank the right to query your religious affiliation, and if you had denied it, you would have had to submit a tax return in order to pay church tax.

 

 

[NikkyG 1]

Hello,

 

I would need a small clarification. If I made a gross income of exercised shares in the US or of the result of dividends,  that yielded 1000USD, and that I got taxed 30% (Federal Tax Withheld) when the shares were issued, what do I have to enter and where ?

 

Should it be in the Anlage KAP Zeile 14 ~ 19 ?

Line 14 - blank (only if the money has been transferred already ? - not the case for now)

Line 15 - 1000USD (what currency ? -how does the tax office know the currency and the country ?)

Line 16 - 700USD (sum - the tax already withheld)

Line 17 - blank (only for loses)

Line 18 - blank (only for loses)

Line 19 - 30% or 300USD

 

 what happens when the money gets transferred to a German bank (what do I have to declare ? and will I get taxed again ?)

 

Thank you.

 

[PandaMunich 16,869]

If you meant exercising stock options of shares of your employer, that income isn't capital income, it's employee income (Anlage N), you just got paid in shares instead of in euro banknotes.

 

You will have to tax the financial "advantage" that you had as wage, e.g. if that option enables you to buy shares that are worth 110€ for 50€, the "advantage" is 60€.

 

You have to "buy" the shares while you're still an employee in order to get a 360€ Freibetrag applied against the sum of all "advantages" (= advantage * no. of options exercised).

 

You can read up on this here: http://www.faz.net/aktuell/finanzen/meine-finanzen/steuern-sparen/was-mitarbeiter-bei-firmen-aktien-steuerlich-beachten-muessen-13442443.html

 

 

*******************************************

 

The dividends are capital income, i.e. go into Anlage KAP.

 

It doesn't matter into which of your worldwide bank accounts income is paid, you always have to tax it immediately. Whether you ever transfer that money to Germany is irrelevant, @Straightpoop wrote a charming post on this:

By the way, since you do investments in other currencies than the € through non-German banks/broker, things get really complicated:

 

The currency in Germany is the €, so all amounts in tax forms are in €.

 

Fill into Anlage KAP:

 

line 15: whatever the pre-tax dividends were in € in the month you got them, when using the official exchange rates: http://www.bundesfinanzministerium.de/Web/DE/Themen/Steuern/Steuerarten/Umsatzsteuer/Umsatzsteuer_Umrechnungskurse/umsatzsteuer_umrechnungskurse.html

 

line 51: whatever US source tax (converted into €) you paid on those dividends

 

[NikkyG 1]

Quote

Fill into Anlage KAP:

 

line 15: whatever the pre-tax dividends were in € in the month you got them, when using the official exchange rates: http://www.bundesfinanzministerium.de/Web/DE/Themen/Steuern/Steuerarten/Umsatzsteuer/Umsatzsteuer_Umrechnungskurse/umsatzsteuer_umrechnungskurse.html

 

line 51: whatever US source tax (converted into €) you paid on those dividends

 

Hello PandaMunich,

 

regarding the dividends I perceived. I get an error in Elster:

Lines 33, 36, 37, 38, 42, 50, 51, 52 are marked red with each the same comment:

Quote

Es wurden angerechnete/anrechnenbare beziehungsweise fiktive ausländische Steuern erklärt, es wurden jedoch keine Angaben zu Kapitalerträgen getätigt (steuerpflichtige Person/Ehemann/Lebenspartner(in) A).

 

 

Not sure what is missing... 

 

Thank, NikkyG

[PandaMunich 16,869]

Sounds like you incorrectly filled in the 2nd column "aus Beteiligungen" of line 51 (which refers to lines 31 to 46), i.e. field 94.

You should have put the US source tax into the 1st column "lt. Bescheinigungen" in line 51, i.e. into field 84.

 

 

[NikkyG 1]

That's it ! Thank you. (I have to enter the Line 51 in the Line 6 section from the Page 1 of Anlage KAP, to have it entered into field 84 automatically - otherwise, it's a grey cell that cannot be edited).

One clarification, why should I enter the US source tax amount into the "Summe der anrechenbaren noch nicht angerechneten ausländischen Steuer." and not the "Summe der angerechneten ausländischen Steuer." ?

[PandaMunich 16,869]

"angerechneten" is the past form, that would mean that you had deducted that US source tax from your income, i.e. chosen the unfavourable (for you!) way of dealing with source tax.

You, on the other hand want the favourable way, that that US source tax will lower (future form: "anrechenbaren, noch nicht angerechneten") your German income tax.

 

Let's do an example:

You had US dividend income of 2,000€, and paid 15% source tax on it, i.e. 300€.

 

Unfavourable way "angerechnet" (past form, i.e. you already deducted the US tax):

You declare in your German tax return: 2,000€ - 300€ US source tax = 1,700€

German tax = 0.25 * 1.055 * (1,700€ - 801€ Sparerfreibetrag) = 237.11€

 

Favourable way "anrechenbaren, noch nicht angerechneten" (future form, i.e. you haven't already deducted the US source tax, but will let the Finanzamt do that at the end, from your German tax burden):

You declare in your German tax return: 2,000€

German tax = 0.25 * 1.055 * (2,000€ - 801€ Sparerfreibetrag) - 300€ US source tax = 316.24€ - 300€ = 16.24€

[NikkyG 1]

Very clear !!!  

Thank you so much !!

 

[PandaMunich 16,869]

You're welcome 

Don't forget to also send the Finanzamt by snail mail a copy of the proof for the US source tax that you have paid - no proof, no tax credit.

[NikkyG 1]

Already made a copy of all documents. Thank you 

[StephenGermany 23]

Regarding the proof... I  mailed the Finanzamt the receipt I received from paying my total 2016 IRS tax bill... which was more than the amount of the credit I claimed. Should that be sufficient?

 

Proving what % of your total tax paid was due to the cap gains, isn't actually all that straightforward. Is there a right way to handle this? Just removing the cap gains, seeing how much your taxes go down, and claiming the difference as the tax credit seems overly in our favor. My tax preparer (I broke down and used one for once in my life, and regret it) actually put together a little spreadsheet, showing how each source of income was taxed, in order to add up to the total, taking into account the tax rate on that income, spreading out mitigating factors like the standard deduction and exemptions. Sound right? Programs like TurboTax unfortunately don't break down your tax bill by income category.

 

Thanks.

[PandaMunich 16,869]

 

7 minutes ago, StephenGermany said:

Regarding the proof... I  mailed the Finanzamt the receipt I received from paying my total 2016 IRS tax bill... which was more than the amount of the credit I claimed. Should that be sufficient?

 

Not really.

Doesn't your US bank (where you keep your depot with your US stocks) give you a certificate how much US source tax was deducted?

 

According to article 10 (2) b of the double taxation treaty between Germany and the US, the US source tax on dividends is 15%:

[StephenGermany 23]

No, I'm a citizen, so US brokerages/banks do not withhold taxes, unlike here in Germany. But if they would do that, they would not know the right amount to withhold, since we have variable tax rates on dividends and cap gains. For non-US persons, the bank is required to withhold a high amount, to make sure they get enough, and then you get some back when you file.

 

The US can take the first 15% on dividends as you stated. But the actual tax rate on dividends in the US varies by income level, ranging from 0% to 23.8%. All of that is true if the dividends are "qualified". Some dividends are not qualified, for example if you haven't owned the stock for 60 days before the ex-dividend date, and then I think they are taxed as if they are regular income.

 

https://en.wikipedia.org/wiki/Qualified_dividend

 

Anyway, tax rates on cap gains are also complicated, since there are short and long term gains (unlike in Germany)... and the tax rate again varies by income level.

 

And regarding cap gains, even after talking to multiple ex-pat tax accountants (which had different opinions on what's correct, roughly 50/50), I'm still not confident I

understand whether the US or Germany has first dibs on my cap gains taxes. @Straightpoop was kind enough to spell it out for me in a PM, as I had a complicated situation for 2016. The treaty makes it sound like Germany has dibbs... that's what @Straightpoop thought as well. One tax accountant told me if the stock is in a US account, the US has dibs... if the stock is held by a German broker, Germany has dibs. Anyway, since I paid someone to do it for me, they would not do it any other way than how they thought, so I paid the US, and claimed a credit in Germany. TBD how that goes with the FA.

 

I think I moved to Germany to do more than learn about taxation, but sometimes it doesn't feel that way. =)

 

Thank you.

 

 

[mikiKam 5]

On 6/24/2016, 1:15:50, PandaMunich said:

It's the same here, but only for shares held in depots at German banks.

 

So if you kept your share depot in your home country bank, then you should tell your home country bank that you are resident in Germany so that they do not deduct your home country income tax (or at least only deduct a reduced source tax, the exact proceeding depends on the double taxation agreement between Germany and your home country).

You will then have to declare all foreign (= not held in a German bank) capital income in Anlage KAP in your yearly tax return. The tax return, which covers the previous calendar year, has to be submitted by 31. May.

The capital income will then be taxed with 26.375% (= 25% + 5.5%*25% Soli), or with your personal tax rate if that is lower than 26.375%.

Details in the TT Elster wiki: http://www.toytowngermany.com/wiki/ELSTER

 

Yes, we also have a loss pool, this is a separate pool just for sales of shares, i.e. you cannot compensate a loss from selling shares with income from dividends, only with another profit from selling shares.

 

Hallo Panda,

 

what is the tax for capital income is I am unemployed and do not have any other income other than my capital income, which is 2-3 thousands Euro pro year?