Tax on Shares/ETF sale/profit

9 posts in this topic

Hi all,

 

I have a question regarding tax exemption of 801 Euros per year against profit from share sales. Can I take advantage of that even though I plan to hold the shares but just want to reduce my overall tax. For example, during some time at the end of the year I sell the shares and rebuy them immediately to register the profit or loss to take advantage of the exemption rather than continue to hold them and then pay higher taxes years down the road when I sell them say after retirement?


Is this legal or considered cheating?

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3 hours ago, zhaider said:

Is this legal or considered cheating?

 

Perfectly OK - and smart.

 

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12 hours ago, Straightpoop said:

 

Perfectly OK - and smart.

 

Even if he buys back immediately,  i. e. same day and in the same account? I seem to remember that you need to either wait at least a day or use different accounts.

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26 minutes ago, jeba said:

Even if he buys back immediately,  i. e. same day and in the same account?

 

Yep.

 

You are thinking about "wash sale" rules.

Germany has no wash sale rules worth mentioning.

Even if it did, wash sale rules do not apply to transactions where there is a gain on the first sale.

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Thanks for all the replies. If I'm understanding it right selling for profit is perfectly all right but selling for loss just to reduce the tax bill isn't, am I right? Another thing, since the actual settlement of shares takes place after two days would that impact if I sell on 31st Dec to take advantage of the exemption?

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All sounds like an awful lot of agro to save tax on 801€, or is it just me...

 

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9 hours ago, zhaider said:

If I'm understanding it right selling for profit is perfectly all right but selling for loss just to reduce the tax bill isn't, am I right?

 

Both are just fine.

 

As noted in my reply to Jeba, Germany has no "wash sale" rules like those in the US.  Except under some rather exceptional theoretical conditions (which I do not fully understand) you can generally sell a security at a loss and repurchase the same security immediately thereafter and still use the loss to offset other stock gains (if the loss was from the sale of stock) or other investment income (if the loss resulted from the sale of a fund or other investment item.)

9 hours ago, GaryC said:

All sounds like an awful lot of agro to save tax on 801€, or is it just me...

 

The point of it is to maximize the annual "Freibetrag" limit.  Gotta use it or lose it.  If you have a modest gain that would allow you to fully exploit that annual freebie and the transaction fees are modest, "harvesting" gains and otherwise managing your portfolio with an eye on the tax consequences is just one aspect of wise financial management. 

 

9 hours ago, zhaider said:

 

 

Another thing, since the actual settlement of shares takes place after two days would that impact if I sell on 31st Dec to take advantage of the exemption?

 

The settlement date is not relevant. The transaction/trade date governs the date gain or loss is recognized.

 

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57 minutes ago, Straightpoop said:

The point of it is to maximize the annual "Freibetrag" limit.  Gotta use it or lose it.  If you have a modest gain that would allow you to fully exploit that annual freebie and the transaction fees are modest, "harvesting" gains and otherwise managing your portfolio with an eye on the tax consequences is just one aspect of wise financial management. 

 

I get the principle and see why people used to do it in the UK with what is now an annual exemption of £12,000+ but for 800 the real gains/savings are marginal but as I am resident in the £12,300 annual exempt regime I am perhaps a little cynical, lol

 

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@Straightpoop Thanks for all the info!

 

@GaryC It doesn't look like much for a year but over the period of 30-40 years I think it will be quite substantial.

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