Investing in American stocks

12 posts in this topic

Hi,

 

I am considering investing in US stock, but I can't find good information on how this works in Germany.

My questions:

- Do I pay taxes in America on dividends, gains, etc?

- How much is the German taxes on dividends, gains? Can I incorporate them in my income taxes, if the rate is higher than my income tax effective rate?

- To buy stocks from, let's say, NASDAQ, which German stock exchange is recommended? Frankfurt? Or are all of them the same? What is the advantage of buying in Frankfurt over buying in Berlin or Munich? Does higher transaction volume in Frankfurt hold any advantage, for example?

 

Thanks!

0

Share this post


Link to post
Share on other sites

All I can tell you is that Germany takes 25% of all gains. Himself says they take it immediately so that he doesn't have to claim on his annual taxes.

1

Share this post


Link to post
Share on other sites

Like fraufruit says. With the Solidaritätszuschlag and church tax (if applicable) it comes up to a bit over 25% but it's a flat tax (it doesn't matter what your effective tax rate is) and it just get deducted automatically (assuming you are using a German broker), so it's pretty simple.

1

Share this post


Link to post
Share on other sites

There is however a tax free rate of 800 euro per year (1600 euro for married couple), so tax return is normally needed to return tax on this money. Alternative is to set up a Freistellungsauftrag at your bank: you declare how much money should be untaxed, maximum is 800/1600 euro. If you do this, no need for tax return since everything above the specified sum will be taxed.

 

 

 

 

1

Share this post


Link to post
Share on other sites

Thanks for the answers so far.

 

Could anyone jump in on the remaining questions, especially which stock exchange is more suitable?

 

Also, regarding the 1600 tax free rate, does it apply to the first 1600€ or if you win more than 1600, it applies to all gains?

0

Share this post


Link to post
Share on other sites

The 1,602€ a year are the Sparerfreibetrag for a married couple.

This covers all your worldwide capital income, i.e. interest, dividends, profits from the sale of shares, and so on.

Only the first 1,602€ of your family's worldwide capital income are tax-free, any amounts above that are taxed with 25% Abgeltungsteuer (in fact 26.375% = 0.25*1.055 since you also pay 5.5% Soli on the Abgeltungsteuer amount), or with your personal income tax rate should that be lower than 25%.

 

If you use a German bank/broker (please see here for comparison of German broker prices, depending on your user profile: small/medium/large investor, high-frequency trader, funds, ETFs), that bank/broker will:

  1. allow you to give them a Freistellungsauftrag that will exempt the first 1,602€ of your capital income from tax
  2. will deduct any Abgelttungsteuer that is due.

In this case, you would only have to submit a tax return with an Anlage KAP in which you declare your capital income if your personal tax rate was below the already deducted 25% and you wanted to get some tax back, or if you invest in non-German shares/funds, since some countries deduct a source tax, which you have to declare in Anlage KAP (well, if you want it back, that is ;)) and which will lower your German income tax: http://www.finanztip.de/indexfonds-etf/quellensteuer/

 

If you use a non-German bank/broker, you will always have to submit Anlage KAP, since the German taxation will only take place with your tax return, since the non-German bank/broker will not have deducted any German Abgeltungsteuer on your capital income.

1

Share this post


Link to post
Share on other sites
On 18/3/2017, 11:01:09, MikeMelga said:

Hi,

 

I am considering investing in US stock, but I can't find good information on how this works in Germany.

My questions:

- Do I pay taxes in America on dividends, gains, etc?

- How much is the German taxes on dividends, gains? Can I incorporate them in my income taxes, if the rate is higher than my income tax effective rate?

- To buy stocks from, let's say, NASDAQ, which German stock exchange is recommended? Frankfurt? Or are all of them the same? What is the advantage of buying in Frankfurt over buying in Berlin or Munich? Does higher transaction volume in Frankfurt hold any advantage, for example?

 

Thanks!

 

It works like with stocks and shares of any other country.

I would strongly suggest using a standard German brokerage account (depot), which is offered by many banks since the German bank will then automatically take care of collecting the Abgeltungssteuer the same way they handle it for interest (Zinsen). They will also issue a yearly tax slip with the figures to enter into your tax return, with indications of where exactly each figure needs to be entered.

There is no real advantage in buying in one exchange over another. At the end, what matters is what you bought.

If you're new to this, I would suggest buying an ETF that tracks (replicates) a well-known US index like the S&P 500, NASDAQ, etc. There are many such ETFs on offer at German depots. See for example Comdirect's ETF selector. Comdirect even offers its own ETF tracking the S&P 500.

 

 

0

Share this post


Link to post
Share on other sites
41 minutes ago, Joe-K said:

There is no real advantage in buying in one exchange over another.

There is. The fees may vary widely, depending on your bank or broker. Also, the liquidity in smallcap US stocks (I haven´t even tried to trade US options outside the US) at exchanges outside the US is a real problem resulting in sometimes huge spreads between bid and ask quotes. You can reduce the US withholding tax on dividends by submitting a form (IIRC correctly form W8) to 15% which will be offset against your German tax liability. It may be less convenient as far as dealing with taxes is concerned, but US or UK online brokers are often cheaper and you only have to pay tax once you submitted your tax return, meaning your money can work longer for you.

 

Be aware that not everything wich at first glance seems to be a stock is actually a stock. E. g. so-called Master Limited Partnerships are traded like stocks but don´t pay dividends but distributions. While one may think "so what" this implies a witholding tax of 39.4% rather than 15%, which might make you think again.

0

Share this post


Link to post
Share on other sites
52 minutes ago, jeba said:

There is. The fees may vary widely, depending on your bank or broker.

 

I don't know about all banks and brokers out there, but when one uses a mainstream online brokerage in Germany, he can see the various options for the exchanges to buy stocks/ETFs from. The fees tend to be comparable. I never had to change the default exchange proposed by the online brokerage.

 

Quote

but US or UK online brokers are often cheaper and you only have to pay tax once you submitted your tax return, meaning your money can work longer for you.

 

I doubt US/UK online brokers are any cheaper. In any case, using a non-German broker will result in an administrative nightmare, with all attendant costs in terms of stress, time, and money (unless you're PandaM, who gets a kick out of such things).  Over the course of a year, a single ETF will generate  dozens of figures that need to be properly reported and taxed (gains, losses, foreign taxes withheld, dividends, what have you, and all that in different currencies). The German broker will handle practically all of those automatically and according to the specific requirements of German tax law, which changes every year. It will issue a single tax slip at the end of the year with all cumulative figures. It is a piece of cake to enter those figures into one's German tax return (or tax software), if at all necessary.

 

0

Share this post


Link to post
Share on other sites

This article suggest to buy GGP and hoping that the takeover attempt by BPY will be successful so you´ll have a very low risk profit of 5,6 %. I don´t understand why the profit shouldn´t be higher given that GGP trades at below $ 21 and you can elect to receive $ 23,5  in cash in case the offer will be accepted. In my book that´s a profit of more than 10%. What am I missing?

0

Share this post


Link to post
Share on other sites

Hi Everyone,

 

continuing this post: is there a difference in taxation if you buy and sell your stock (and make gains) after a week or after 2 years for example ?

 

Thanks

0

Share this post


Link to post
Share on other sites
On 2017. 3. 19. 오후, Joe-K said:

 

It works like with stocks and shares of any other country.

I would strongly suggest using a standard German brokerage account (depot), which is offered by many banks since the German bank will then automatically take care of collecting the Abgeltungssteuer the same way they handle it for interest (Zinsen). They will also issue a yearly tax slip with the figures to enter into your tax return, with indications of where exactly each figure needs to be entered.

There is no real advantage in buying in one exchange over another. At the end, what matters is what you bought.

If you're new to this, I would suggest buying an ETF that tracks (replicates) a well-known US index like the S&P 500, NASDAQ, etc. There are many such ETFs on offer at German depots. See for example Comdirect's ETF selector. Comdirect even offers its own ETF tracking the S&P 500.

 

 

 

 

Sorry for my random question. 

 

I am also thinking of investing small amount every month into the US index fund. (about 150 euros every month).

 

Could you recommend any good website or app?

 

Kind regards,

-J 

0

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now