Fund taxation in 2018 and "fiktive Veräußerung"

[Frantic 72]

I contacted flatex support (that will answer in German...) and I am trying to google with googletranslate helping me but it would be great if I can have an answer here.

In 2018 taxation rules for fund changed. I knew it. But i did not know about this fiktive Veräußerung and so I am trying to understand if my broker basically sold and bought again without triggering the capital gain taxes payment ...or yes ? What it is happening actually ? Expecially from a tax point of view, what happens and should I do some actions ? My broker manage automatically the tax part, so automatically capita gains are payed to the Finanzamt. Does this fiktive operations change something ?

 

I discovered this looking at my Depotbestand and I saw that the "kauf" costs did not match with the one i have on my excel sheet where i track all operations...they were too much near the current value of funds although i bouth them few months ago.

[PandaMunich 16,704]

For the new way that funds get taxed, they need the value of that fund on 1.1.2018, so for all funds they did a fictive "sale" (= fiktive Veräußerung) on 31. December 2017, and a fictive "buy them back" on 1. January 2018.

These "sales" and "buiyngs-back" are only in their heads, so nothing to worry about.

 

Details in: https://www.test.de/Fondsbesteuerung-ab-2018-Das-muessen-Sie-ueber-die-Fondssteuer-wissen-5124267-0/

 

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If you had some funds that you bought in 2008 or earlier, there is some extra bad news.

Back then, they promised that no matter when in the future you sell these "old" pre-2009 funds, the profit you make from the sale will be tax-free.

So many people quickly bought some funds before the 31.12.2018 deadline, thinking they would keep them as a long-term investment.

 

Now, they went back on their word.

All rises in the fund value (= Kursgewinne) that happened until 31.12.2017 are still tax-free, which is why a "fiktive Veräußerung" = "fictive sale" appears in your Depot, so that they know the value on 31. December 2017.

Then they do a fictive "buying-back" of these funds on 1. January 2018.

 

If you then sell these "old" pre-2009 funds sometime in the future, they give you a special tax-free allowance of 100,000€ for the rises in fund value (= Kursgewinne) that were generated between 1.1.2018 and the date you sold.

 

You can read up on this here: http://www.dasinvestment.com/investmentsteuerreform-so-lassen-sich-100000-euro-freibetrag-optimal-nutzen/

 

Example:

You bought funds in 2008 at 100,000€

These funds were worth 240,000€ on 31. December 2017

--> the "profit" up till 31.12.2017 of 140,000€ (= 240,000€ - 100,000€) is tax-free.

 

They now take note of the value on 31.12.2017, those 240,000€.

 

If you now sell the funds, e.g. in 2027, and get 360,000€ for them, then you will have to tax:

selling_price - value_on_31.12.2017 - special_tax_free_amount

= 360,000€ - 240,000€ - 100,000€

= 20,000€ 

with whatever the tax rate may be in 2027 (at the moment, the tax rate is 26.375% = 25% Abgeltungsteuer + 5.5%*25% = 1.375% Solidaritätszuschlag).

 

[Frantic 72]

I bough funds between august and october 2017.

If I understood well, the gain I made till 31.12.2017 will not be taxed (if I stay under the 100k allowance) as it happens for the pre-2009 funds, right ?

 

By the way, I want to really thank you @PandaMunich for the valuable help you regularly provide here in Toytown Germany. Without detracting from the rest of participants to this forum, I think you are a real asset here in TT. 

[PandaMunich 16,704]

18 hours ago, Frantic said:

If I understood well, the gain I made till 31.12.2017 will not be taxed (if I stay under the 100k allowance) as it happens for the pre-2009 funds, right ?

 

No, sorry, you didn't understand.

The profit up to 31.12.2017 being tax-free and any profit after 31.12.2017 being tax-free up to 100,000€ only applies to pre-2009 funds, i.e. funds that you bought before 2009.

 

Example:

You bought funds in 2008 at 100,000€

These funds were worth 240,000€ on 31. December 2017

--> the "profit" up till 31.12.2017 of 140,000€ (= 240,000€ - 100,000€) is tax-free.

 

They now take note of the value on 31.12.2017, those 240,000€.

 

If you now sell the funds, e.g. in 2027, and get 360,000€ for them, then you will have to tax:

selling_price - value_on_31.12.2017 - special_tax_free_amount

= 360,000€ - 240,000€ - 100,000€

= 20,000€ 

with whatever the tax rate may be in 2027 (at the moment, the tax rate is 26.375% = 25% Abgeltungsteuer + 5.5%*25% = 1.375% Solidaritätszuschlag).

 

18 hours ago, Frantic said:

I bought funds between August and October 2017.

 

For 2017, you paid 26.375% Abgeltungsteuer+Soli on 100% of all your dividends that were paid out in 2017, no matter whether they were paid out to you or accumulated/reinvested into the fund (= thesauriert).

 

You also paid 26.375% Abgeltungsteuer+Soli on any profit you had if you sold in 2017 post-2008 funds, i.e. if you sold in 2017 funds that you had bought on 1.1.2009 or later.

[PandaMunich 16,704]

OVERVIEW of changes in fund taxation in 2018

 

 

Up till 2017, the taxation of funds was completely transparent, in the sense that all income you really had, i.e.:

• 100% of the paid-out (= distributed) dividends,
• 100% of the reinvested (= accumulated) dividends, and
• 100% of the profit from the sale

got taxed immediately. 

 

The disadvantage was that you had to keep track of your accumulated, already taxed dividends, since when you sold the fund down the line, they would also tax the part of the fund gain that stemmed from the accumulated dividends again.

So you had to remember to submit proof how much tax you had already pre-paid in previous years on these accumulated dividends, and check whether the Finanzamt really deducted that pre-paid tax when taxing the sale of the fund.

 

By the way, if you own funds that have been bought between 2009 and 2017, you still have to hold on to that paper proof for the tax you had paid up till 2017 on accumulated dividends, and when you sell that fund in 2018 or later, also send the Finanzamt that proof, so that you don't get taxed twice.

 

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Comprehensive guide (in German): http://www.finanztip.de/indexfonds-etf/investmentsteuerreformgesetz/

 

From 2018, the taxation of funds becomes a bit intransparent:

• for accumulating funds (they reinvest the dividends), you no longer pay tax on the real amount of your accumulated dividends, instead the Finanzamt taxes a "fictive profit" that is based on how much the value of your fund rose that year. 
• for distributing funds (they distribute the dividends to you), if the "fictive profit" exceeds the taxable ("taxable" is my opinion, which deviates from all sources, but I still think I'm right ) value of the distributed dividends, you also end up paying tax.

The advantage is that from now on the Finanzamt now keeps track of all the tax they make you pre-pay on these "fictive profits", so when you sell the fund they will automatically apply them against the final tax debt.

 

 

If the following wall of text is too much for you, just skip to the examples at the end 

 

There had been a category of funds, the "synthetisch thesaurierender ETF" (= synthetic accumulating exchange-traded fund), that had managed to use a tax loophole in that they turned dividends into capital gains before the dividends happened, i.e. instead of having to tax the dividend amount every year, the investor only had to tax the profit from the sale, once he sold the fund at some point in the future. 

The Finanzamt didn't like this, since it would only get its tax in a few years instead of immediately, and even worse, if that person moved away from Germany, they wouldn't get any tax at all, since when that person sold that "synthetisch thesaurierender ETF" after having moved away from Germany, the new country of residence would get to tax the entire profit (= Kursgewinn), including the parts of the profit that had been generated during the time that person had lived in Germany.

 

So they thought long and hard how they could get to tax at least some of these profits, and came up with an idea.

They defined a "base" interest called Basiszins, which changes from year to year (in 2016 it was 1.1%, in 2017 it was 0.59%, and the 2018 value hasn't been fixed yet), see in here, scroll down to "Vorabpauschale und Basisertrag".

 

They then went on to assume a "fictive increase in value", a specific percentage of which will be considered taxable income.
But don't worry, you won't end up paying tax on a "fictive profit" if your fund didn't do well that year, details in the examples near the very bottom of this post.

• "fictive increase in value" = value_of_fund_at_start_of_year * base_interest

Depending on what kind of fund you have, only a specific percentage of your (source):

• "fictive increase in value" i.e. the appreciation of your fund that they consider "should" have happened (this is the German state taking an instalment on the tax on the later profit that you will have to tax once you sell that fund in a later year) 
• distributed (= paid out) dividends
• profit from the sale of the fund

will be taxable.

 

This specific percentage is (for private investors, the percentages are different for business investors), see the tables in BMF-Monatsbericht and DATEV brochure:

• 70% for German or foreign Aktienfonds (= equity fund, i.e. one that invests at least 51% of its money in stocks/shares), ETF also count as Aktienfonds
• 85% for German or foreign Mischfonds (= fund that invests at least 25% of its money in stocks/shares)
• 40% for German offene Immobilienfonds (= open-end fund that invests at least 51% of its money in German real estate or in German companies that only own German real estate)
• 20% for foreign offene Immobilienfonds (= open-end fund that invests at least 51% of its money in non-German real estate or in non-German companies that only own on-German real estate)
• 100% for all other German or foreign funds, e.g. for:
  - funds that invest less than 25% in stocks/shares
  - Rentenfonds (= fund that invests in bonds), since bonds guarantee a fixed income, and cannot lose value as rapidly as an equity fund, this is desirable for pensioners.
  - Geldmarktfonds (= money market fund, invests in fixed-term deposits and bonds, all of which will come due in less than 12 months)

So in the end you have a "fictive profit" called Basisertrag, which is defined as the value of that fund on the stock exchange at the start of the year, multiplied by the base interest for that year, multiplied by that "specific percentage":

• fictive_profit = value_of_fund_at_start_of_year * base_interest * specific_percentage
  Basisertrag = Kurs_1. Januar * Basiszins * (100% - Teilfreistellung)

 

In order to reach a lower specific percentage, a lot of funds scrambled in the last few months of 2017 to raise their investment in stocks/shares to at least 51% or 25%, so that they would be classified as "Aktienfonds" or "Mischfonds" under the new 2018 legislation.

However, the new legislation also nudges investors towards more risky investments, i.e. funds that invest mainly in stocks/shares, since some investors only look at the how much of the income is taxable, without considering the risk of losing the capital itself in a stock market crash.

 

The idea behind no longer obliging the investor to tax 100% of the dividends and 100% of the profits from sales (like they did up till 2017) is that starting with 1.1.2018, they introduced an additional tax, this time paid by the fund itself, of 15% Körperschaftsteuer on German dividends and German real estate income.

So they now tax both the fund itself and the investor.

 

Foreign dividends are usually taxed in the country of origin with a 15% foreign source tax (most double taxation treaties have this 15% source tax on dividends):

• Up till 2017, this 15% foreign source tax reduced your German tax, so you ended up paying 15%*gross_dividend to that foreign country and 10%*gross_dividend (= 25% Abgeltungsteuer - 15% source tax) to Germany.
  So in total you did pay 25% tax, just as if you had gotten a German dividend, just to two different countries - though with a little saving on the Solidaritätszuschlag compared to a German dividend, since you only paid Solidaritätszuschlag on (10%*gross_dividend), and not on (25%*gross_dividend) like for German dividends.
  The total tax rate on foreign dividends was 25.55% (= 0.25 + 0.1*0.055), while the total tax rate on German dividends was 26.375% (= 0.25 + 0.25*0.055).
  For an example, please see here: https://www.toytowngermany.com/forum/topic/375615-taxation-of-us-funds/?do=findComment&comment=3635851
   
• From 2018, the foreign source tax on dividends no longer reduces your German tax.
  This will mean that compared to 2017, you're disadvantaged with regards to the tax rate on the distributed dividend:
   - tax rate on gross foreign dividend in an Aktienfonds: 15% foreign source tax + 70% * 26.375% Abgeltungsteuer+Soli = 33.4625% 
   - tax rate on gross foreign dividend in a Mischfonds: 15% foreign source tax + 85% * 26.375% Abgeltungsteuer+Soli = 37.41875% 
  
  Just to be clear: this is about foreign dividends, i.e. about the profits a foreign corporation pays to its shareholders.
  Distributions by funds that do not own shares/stocks, e.g. the distributions by Rentenfonds or by Geldmarktfonds which are based on their ownership and trading of bonds and fixed term deposits are not dividends, and therefore for these distributions any foreign source tax that was charged still reduces your German tax, even in 2018. They left these kinds of funds at 100% taxation, i.e. their "specific percentage" is 100%, since there is no Teilfreistellung for them, so it would have been unfair to take away the tax credit for the foreign source tax that these investors paid.
   

Let's have a look at the effect of this new 15% Körperschaftsteuer (paid by the fund), on distributed German dividends:

First, we have to be clear on the fact that the fund, having already paid 15% Körperschaftsteuer, can only distribute to the investor (you!):

             net_dividend = gross_dividend - 0.15*gross_dividend = 0.85 * gross_dividend

 

The investor only pays German tax on this net_dividend (unlike in the case of a foreign dividend, where the assessment basis is always the gross_dividend):

• tax rate on distributed gross German dividend in an Aktienfonds: 15% Körperschaftsteuer + 70% * 0.85 * 26.375% Abgeltungsteuer+Soli = 30.693125% 
• tax rate on distributed gross German dividend in a Mischfonds: 15% Körperschaftsteuer + 85% * 0.85 * 26.375% Abgeltungsteuer+Soli = 34.0559375% 

However, let's not forget that they graciously decided that from 2018, only 70% of the profit from the sale of your Aktienfonds is taxable (85% if you have a Mischfonds). 
In the past, a non-accumulating fund that would have contained all the DAX stocks would have increased in value by 11% per year (= Kursgewinne), while the dividend return on investment would have been 3% (source).

Let's do an example, assuming that these same values also hold true for 2018:

purchase price of DAX fund (= Aktienfonds) on 1.1.2018: 100€
distributed dividends in 2018, 3% ROI: 3€
selling price on 31.12.2018, 11% ROI: 111€

Tax: 
0.92€ = 30.693125% * 3€ tax on distributed dividend
+ 2.03€ = 26.375% * 70% * (111€ - 100€) on the profit from selling the fund
____________________________________________________________
2.95€ on 14€ (= 3€ + 11€) that you made in 2018
--> tax rate: 2.95€/14€ = 21.07% which is lower than the previous tax rate of 26.375%.

However, this is only the case because the relatively high 11% assumed capital gain (= Kursgewinn).

So let's see how well the stock market has to perform for the new form of taxation to be more advantageous than the old one (we will assume the 3% dividend ROI to be constant, even in a bad year):

purchase price of DAX fund (= Aktienfonds) on 1.1.2018: 100€
distributed dividends in 2018, 3% ROI: 3€
selling price on 31.12.2018, x ROI: 100€ * (1 + x)

Question: for what x is old tax > new tax ?
0.26375 * (100€ * x + 3€) > 30.693125% * 3€ + 0.26375 * 0.7 * 100€ * x
⇔ 26.375€*x + 0.79125€ > 0.92€ + 18.4625€*x
⇔ 7.9125€*x > 0.12875€
⇔ x > 0.016271721
⇔ x > 1.63%

Answer: as long as the fund value increases (= Kursgewinn) by more than 1.63% a year, the new way of taxation is more advantageous than the old way.

 

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Example for a synthetic accumulating ETF:

• the "specific_percentage" for a  "synthetisch thesaurierender ETF" is 70%, since it is an Aktienfonds
  value of "synthetisch thesaurierender ETF" on stock exchange on 1.1.2018: 100€
  real value of "synthetisch thesaurierender ETF" on stock exchange on 31.12.2018 (= closing price): 111€
  --> "real" appreciation in value in 2018: 11€ (= 111€ - 100€)
  
  Should the base interest in 2018 be again 1.1%, like it was in 2016:
  --> Basisertrag = 100€ * 1.1% * 70% = 0.77€
  
  Since the Basisertrag=0.77€ is lower than the "real" appreciation in value of 11€ in 2018, you have to pay 26.375% Abgeltungsteuer+Soli on the Basisertrag, i.e. the part of the appreciation in value that is taxable (= Vorabpauschale) is 0.77€, and you pay an instalment tax in 2018 on that fund:
          instalment_tax_2018 = 26.375% * 0.77€ = 0.20€   (remember, under the old legislation, the Finanzamt wouldn't have gotten any tax at all!)
  
  If you sell that "synthetisch thesaurierender ETF" on 15.07.2019 at 117€, what you pre-paid in tax in 2018, the instalment tax of 0.20€, will reduce the 2019 tax on that sales profit:
  tax_2019 = 26.375% * 70% * (selling_price - purchase_price) - sum_of_already_paid_instalment_taxes_from_previous_years = 0.26375 * 0.7 * (117€ - 100€) - 0.20€ = 2.94€

 

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Examples (taken from this comprehensive guide) showing the 2018 taxation for an Aktienfonds (= equity fund) for an ETF, i.e. for a fund that invested at least 51% in stocks/shares.

 

The value of your fund on 1.1.2018 was 10,000€.

The Basiszins in 2018 is 1.1% (that's just an assumption, we won't know its real value until 2018 is over).

 

A. accumulating equity fund (= thesaurierender Aktienfonds), or accumulating ETF, i.e. it accumulates/reinvests the dividends from the shares/stocks

 

   a.) "real" increase in value > "fictive profit"               my opinion: 0.7*("real" increase in value) > "fictive profit" 
      value of your fund on 1.1.2018 was 10,000€.

      value of your fund on 31.12.2018 was 10,500€.
      "real" increase in value: 500€
      "fictive profit" = Basisertrag = 1.1% * 10,000€ * 70% = 77€ 
      --> since "real" increase in value = 500€ > "fictive profit"=77€, you have to pay 26.375% tax on the "fictive profit" of 77€.
 

   b.) "real" increase in value < "fictive profit"               my opinion: 0.7*("real" increase in value) < "fictive profit" 

      value of your fund on 1.1.2018 was 10,000€.
      value of your fund on 31.12.2018 was 10,050€.
      "real" increase in value: 50€
      "fictive profit" = Basisertrag = 1.1% * 10,000€ * 70% = 77€ 
      --> since "real" increase in value = 50€ < "fictive profit"=77€, you have to pay 26.375% tax on "real" increase in value of 50€.

 

       Note: I think they made a mistake in there, I think it should be: pay 26.375% tax on 0.7*("real" increase in value) = 0.7*50€ = 35€

 

  c.) fund value didn't increase, or even decreased
      value of your fund on 1.1.2018 was 10,000€.
      value of your fund on 31.12.2018 was 10,000€.
      "real" increase in value: 0€
      "fictive profit" = Basisertrag = 1.1% * 10,000€ * 70% = 77€ 
      --> since "real" increase in value = 0€ < "fictive profit"=77€, you don't pay any tax

     Same result, no tax to pay, if the value of the fund decreased, e.g. to 9,000€.

 

 

B. distributing equity fund (= ausschüttender Aktienfonds), or distributing ETF, i.e. it distributes the dividends from the shares/stocks

 

   a.) "real" increase in value > "fictive profit"               my opinion: 0.7*("real" increase in value) > "fictive profit"
      distributed dividends: 50€
      value of your fund on 1.1.2018 was 10,000€.

      value of your fund on 31.12.2018 was 10,500€.
      "real" increase in value: 500€
      "fictive profit" = Basisertrag = 1.1% * 10,000€ * 70% = 77€ 
      --> since "real" increase in value = 500€ > "fictive profit"=77€, you have to pay 26.375% tax on ("fictive profit" - distributed_dividends) = (77€ - 50€) = 27€.

     Note: I think they made a mistake in there, I think it should be: pay 26.375% tax on ("fictive profit" - taxable_distributed_dividends) = (77€ - 0.7*50€) = 42€.

 

   b.) "real" increase in value < "fictive profit"               my opinion: 0.7*("real" increase in value) < "fictive profit"

      distributed dividends: 50€

      value of your fund on 1.1.2018 was 10,000€.
      value of your fund on 31.12.2018 was 10,075€.
      "real" increase in value: 75€
      "fictive profit" = Basisertrag = 1.1% * 10,000€ * 70% = 77€ 
      --> since "real" increase in value = 75€ < "fictive profit"=77€, you have to pay 26.375% tax on ("real" increase - distributed_dividends) = (60€ - 50€) = 10€.

     Note: I think they made a mistake in there, I think it should be:
     --> since 0.7*("real" increase in value) = 0.7*75€ = 52.50€ < "fictive profit"=77€, you have to pay 26.375% tax on [0.7*("real" increase) - taxable_distributed_dividends)] = (0.7*75€ - 0.7*50€) = 17.50€.

 

  c.) fund value didn't increase, or even decreased
      distributed dividends: 50€

      value of your fund on 1.1.2018 was 10,000€.
      value of your fund on 31.12.2018 was 10,000€.
      "real" increase in value: 0€
      "fictive profit" = Basisertrag = 1.1% * 10,000€ * 70% = 77€ 
      --> since ("real" increase in value) - distributed_dividends (my opinion: taxable_distributed_dividends) < "fictive profit"=77€, you don't pay any tax
      Same result, no tax to pay, if the value of the fund decreased, e.g. to 9,000€.

 

 

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

 

Just to be very clear: if you simply own stocks/shares, i.e. not through a fund, nothing has changed in 2018 regarding their taxation.

It's still simple, transparent and follows common sense.

 

You still have to tax:

• 100% of your dividends (if you paid 15% foreign source tax, i.e. Quellensteuer on the dividend, it will still reduce your German tax, don't worry)
• 100% of the profit you make when selling the stocks/shares

and pay 26.375% Abgeltungsteuer+Soli on the dividends/profit.

 

Actually, on foreign dividends, you end up paying a total tax rate of only 25.55%.

The 15% foreign source tax reduces your German tax, so you end up paying:

1. to foreign country: 15% * gross_dividend
2. to Germany: 10% * gross_dividend (= 25% Abgeltungsteuer - 15% foreign source tax), plus 5.5% Solidaritätszuschlag on those (10% * gross_dividend), i.e. in total:
   10% * gross_dividend + (10% * gross_dividend)*0.055 = 10.55% * gross_dividend

--> total tax on foreign dividend = 15% * gross_dividend + 10.55% * gross_dividend = 25.55% * gross_dividend

 

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

 

Non-"capital-income" closed-end funds:

 

Nothing has changed in 2018 regarding the taxation of the following types of geschlossene Fonds (= closed-end funds), they are still taxed transparently, just like a Personengesellschaft would be taxed, and they are taxed in the same "non-capital-income" categories "Vermietung" (= rental income) or "Gewerbe" (= business income) that they were in 2017 and earlier:

• rental income: geschlossener Immobilienfonds (= closed-end real estate funds), i.e. when some investors banded together to buy an expensive real-estate object, with the goal of selling that real-estate object again after more than 10 years have passed (since the profit from selling German real estate that was held for more than 10 years is tax-free).
  
  The taxation of the yearly rental profits from that closed-end real estate fund differs, depending on whether the fund owns:
  - German real estate: declare rental profit in Anlage V, will be taxed with your personal German income tax rate
  - foreign real estate, double taxation agreement has Anrechnung clause (is rare!) in article 23: declare in Anlage V, pay German income tax, foreign tax reduces German tax
  - foreign real estate, double taxation agreement has Progression clause in article 23: declare as Progressionseinkommen, profit will raise your German tax rate
   
• business income: e.g. geschlossener Solarenergiefonds, Windenergiefonds, Containerfonds oder Medienfonds (= closed-end fund that invested either in solar energy plants, wind energy plants, shipping containers or movie productions).
  The income from these funds is considered "Einkommen aus Gewerbebetrieb", and has to be declared both in Anlage G and a Gewerbesteuererklärung (plus in Anlage AUS if the fund was foreign).
  Especially the investment in Medienfonds has nearly always been a bad idea, they invested mainly in unsuccessful Hollywood movies (which coined the term "stupid German money") and also used already illegal tax loopholes, which meant that suddenly the Finanzamt turned up and charged the investors extra tax, plus 6% per year late interest: http://www.kanzlei-mutschke.de/geschlossene-fonds/fondsarten/medienfonds/

Attention: many investors have been ripped off with geschlossene Fonds (= closed-end funds) in the past, so please think twice before investing in one: 

• http://www.resch-rechtsanwaelte.de/anlegerschutz-fonds.html
• http://www.kanzlei-mutschke.de/geschlossene-fonds/

[HEM 11,160]

One can be forgiven for thinking that parliament (the ominous Gesetzgeber) really wants to disuade people from investing for their future by making things as complex as possible.  Seems they prefer people to spend-as-they-earn & in old age fall on social security...

[PandaMunich 16,704]

Or you could simply buy shares/stock instead of funds and avoid all the above mind-boggling calculations 

[HEM 11,160]

The (main) reason to buy funds is to spread the risk & (in most cases) have a fund manager to watch over the contents.

[Frantic 72]

When I bought those funds I knew about the mess related to the Dividend calculations. In order to avoid to do all calculations and make more difficult my tax declaration I just bought funds based ( Fondsdomizil ) in Germany (that fix by themsleves directly with the Finanzamt the dividend stuff). For the rest, I intentionally chose a Broker that manage for me all the tax topic (it is flatex) related to gain/loss from sales/purchase of stock and funds plus other stuff like "loss wallet" (to use as compensation in case of gains) and the 600euro (more or less) freetax thresold.

This means that I have (had ?) a limited choice in funds and also broker with expensive fees compared to not local broker like IG that offers lot smaller fees. But in this way at least I don't have to bother with tax declaration, expecially if the invested sum is not huge.

And this is the reason also why I chose to invest in funds...in order to diversify. Investing directly in Stocks by building a diversified portfolio, expecially with the high fee of german broker, needs a starting sum that I don't have  

[PandaMunich 16,704]

4 hours ago, Frantic said:

600euro (more or less) freetax threshold

 

Actually, the first 801€ (= Sparerfreibetrag) of your capital income are tax free. 

You have to give your bank an explicit, signed Freistellungsauftrag so that they exempt these first 801€ from 26.375% Abgeltungsteuer+Solidaritätszuschlag.

[Hulie 0]

Hi everyone,

 

I have a question regarding taxation of a foreign closed-end fund.

 

I have invested into USD denominated private equity fund (A Cayman Islands Exempted Limited Partnership), which invests in a country outside EU, in 2011. It did not do any payouts since 2014, when I still lived in that other country outside EU. So in 2017 I did not get anything, but paid a management fee. The fund recorded an unrealised capital gain on paper for 2017.

 

Do I need to declare anything for 2017? I have only been working in Germany since 2017, so did not file anything before that.

[PandaMunich 16,704]

20 hours ago, Hulie said:

The fund recorded an unrealised capital gain on paper for 2017.

 

Do I need to declare anything for 2017?

Yes, you need to declare that paper gain in Anlage KAP, line 15.

[Hulie 0]

16 minutes ago, PandaMunich said:

Yes, you need to declare that paper gain in Anlage KAP, line 15.

Thank you very much! Does it mean I will be taxed on this amount? If so, what happens if this paper gain is reversed in 2018, do I get the tax back or if I move away from Germany later and the investment goes bust? This investment is very volatile. In fact, it is still in the red from 2014 levels, 2017 gain is a recovery from previous losses - it took a 50% hit in 2015. Could I avoid paying the tax for 2017 if I show that despite the 2017 paper gain, it's actually in the loss from inception levels or from the last payout. 

[HEM 11,160]

51 minutes ago, Hulie said:

If so, what happens if this paper gain is reversed in 2018, do I get the tax back ...

I believe its your tough luck - but the Finanzamt have got their cut!

 

Some years ago we were able to purchase company shares at a favourable price - of course the "geldwerter Vorteil" was taxed in DE.  Then the company shares collapsed.  Luckily I had not invested too much but lost a fair bit - but at least the FA was in plus...

[PandaMunich 16,704]

If that 2017 gain was because of not paid out dividends that were reinvested, you have to declare and tax that gain in Germany. Otherwise not.

 

From 2018, the way funds are taxed changes, see above.

[SpaghettiAlDente 0]

I have a query about how to calculate fund taxes for funds held in a foreign account and in foreign currency:

 

I have some index funds bought in the UK before I moved to Germany, they are held in a UK account and their value is reported in British Pounds. 

 

I assume that in this case to know the value of the funds on the 1.1.2018, and on the 31.12.2018, I will have to convert their value in Euro by using the currency exchange for the corresponding day, is this correct? and if  so, where I can find the official currency rate that the Finanzamt will accept? 

 

thanks for any advice/suggestion

[HEM 11,160]

1 hour ago, SpaghettiAlDente said:

where I can find the official currency rate that the Finanzamt will accept?

 

PandaM has not been online for a few days (her supply of bamboo shoots is probably snowed in).

She would likely point you here:  http://www.bundesfinanzministerium.de/Web/DE/Themen/Steuern/Steuerarten/Umsatzsteuer/Umsatzsteuer_Umrechnungskurse/umsatzsteuer_umrechnungskurse.html

 

However, in my limited experience my FA has accepted the rate for the day as given by oanda.com.

TBH so far they have never asked where I get the exchange rates I use when reporting dividends.

You do report your dividends I hope?

[SpaghettiAlDente 0]

Thanks for your reply @HEM,

 

I see, so I can just use the values for January and December from the table of 2018 rather than the exchange rate on the exact day.  

 

My funds are all accumulating funds (category A in the example from PandaM above in this thread), so their value at the end of the year includes the dividends, if I understood well the new law for accumulating funds you don't need to disaggregate the dividends from the value of the fund at the end of the year.   

 

 

[Larrit 0]

Dear Toytown forum,

If someone would be able to provide advice or information on the below question, it would be great. I have a question about tax in Germany on foreign (Swedish) equity funds = Aktienfonds.

I am a Swedish citizen and have been living, working and paying taxes in Germany for the last 10 years. In the middle of 1980s while living in Sweden I put money in three Swedish Aktienfonds and in 2015 I inherited an Aktienfond in Sweden from my father. During all the years I have been paying tax in Sweden on the dividends, also since moving to Germany in 2008. The funds were never included in the German tax return but I now realize they perhaps should have been taxed in Germany rather than in Sweden.

In 2018 I sold two of the four funds so in the next Swedish tax return I will be paying 30% tax on the profits of the sale.

As I understand it, in Germany profits from the first 100000€ balance (value) from Aktienfonds are free from tax in certain circumstances.

Here is the question: Would that apply as well to foreign funds purchased with foreign money and inherited funds (as described above)?

Even if this not the case and I took up the gain in my German tax return, the tax rate in Germany is 26,375%, so I would be paying less tax than in Sweden.

Regards,

Larrit

[PandaMunich 16,704]

11 hours ago, Larrit said:

The funds were never included in the German tax return but I now realize they perhaps should have been taxed in Germany rather than in Sweden.

Here is the question: Would that apply as well to foreign funds purchased with foreign money and inherited funds (as described above)?

 

Yes, and from the German point of view, you have been practicing tax evasion if your worldwide capital income (interest, profits from selling funds/shares bought after 2008, dividends even for pre-2009 funds/shares!, ...) was above the yearly tax-free amount for capital income, this amount is called the Sparer-Pauschbetrag and is 801€ (1,602€ per married couple), in accordance with §20 (9) EStG.

 

If your worldwide capital income was below 801€ (or 1,602€ if you're married), simply write the Finanzamt a letter explaining your situation.

 

If we are talking about more than 801€ a year (or 1,602€ if you're married), you will need a Steuerberater to do a Selbstanzeige in accordance with §371 AO (see here for this section in English: §371 AO) to clear this up without also facing criminal proceedings.

But the fact that you have been paying 30% tax to Sweden, when you should have only paying 26.375%, will at least show them that you didn't do it to pay less tax.

 

Dividends:

Yes, Germany has the taxation rights on the dividends (see article 10 of the double taxation agreement between Germany and Sweden), but with Sweden being allowed to charge you 15% source tax which would reduce the German income tax of 26.375%. So 15% to Sweden, the rest of 11.375% to Germany.

These dividends have always been taxable at 26.375%, even for funds bought in 2008 or earlier.

From 2018, dividends are still taxable at 26.375%.

However, if you have a "thesaurierenden Fonds", i.e. a fund that reinvests the dividends instead of paying them out, they now do the taxation via the Vorabpauschale, i.e. 26.375% tax not based on the real re-invested dividend like before 2018, but on an "imaginary" dividend.

 

Profit from selling funds:

Germany also has the taxation rights on your profit from selling a fund, see article 13 (4) of the double taxation agreement between Germany and Sweden.

If you sell "old" funds that you bought in 2008 or earlier (or your father bought in 2008 or earlier and you then inherited, even if you inherited after 2008), then any increase in their value between the date you bought them (or your father bought them) and 31. December 2017 is not subject to income tax at all.

If you sell these "old" funds, the first 100,000€ of the profit (= value when selling, minus value on 31. December 2017) are not subject to tax.

All this is laid down in §56 (6) Invenstmentsteuergesetz: https://www.gesetze-im-internet.de/invstg_2018/__56.html

• (6) Bei Alt-Anteilen, die vor dem 1. Januar 2009 erworben wurden und seit der Anschaffung nicht im Betriebsvermögen gehalten wurden (bestandsgeschützte Alt-Anteile), sind
  1.
  Wertveränderungen, die zwischen dem Anschaffungszeitpunkt und dem 31. Dezember 2017 eingetreten sind, steuerfrei und
  2.
  Wertveränderungen, die ab dem 1. Januar 2018 eingetreten sind, steuerpflichtig, soweit der Gewinn aus der Veräußerung von bestandsgeschützten Alt-Anteilen 100 000 Euro übersteigt.
  Der am Schluss des Veranlagungszeitraums verbleibende Freibetrag nach Satz 1 Nummer 2 ist bis zu seinem vollständigen Verbrauch jährlich gesondert festzustellen. Zuständig für die gesonderte Feststellung des verbleibenden Freibetrags ist das Finanzamt, das für die Besteuerung des Anlegers nach dem Einkommen zuständig ist. Anteile im Sinne des § 21 Absatz 2a und 2b des Investmentsteuergesetzes in der bis zum 31. Dezember 2017 geltenden Fassung sind keine bestandsgeschützten Alt-Anteile im Sinne der Sätze 1 bis 5.