Stocks from USA , taxes, and ability to keep all in American brokerage due to >6 months living in Germany

[frankmuller 0]

Hi all,

 

I wanted to ask a question directly related to what type of stocks we are allowed to hold while living in Germany.

 

I was told after 6 months of living here, which is now 8, that we are "German residents", which means that you are supposed to tell your bank/brokerage that you are living abroad which may or may not limit the type of Stocks, rather ETFS (SP500 for example), that we are able to buy. Not sure how accurate this information is so if someone could shed some light that would be appreciated.

 

I am new to Germany and was attempting to search through the forums for more information as well as online but came to a loss and couldn't find anything. I spoke to a tax consultant here in Germany who did not know, as well as someone from Charles Schwab who did not know exactly what to say. What I did find out from Charles Schwab, which may or may not be true, is that if we already have ETFS then we can keep them, but we are not allowed to by new ones due to an American law. Apparently we can keep Charles Schwab as a Brokerage if we let them know where we live.

 

My questions are:

 

1. Does anyone have experience with moving to Germany from the USA while holding a considerate amount of money in American stocks, as well as what did you have to do with your ETFS and what are the laws for what we are allowed to hold while living in Germany, do we need to report a new address in Germany? or are we allowed to keep the American address. Are there penalties for not reporting German address. 

 

2. I read that the tax rate is a straight 25% here in Germany for all stocks. I found out from someone that we would pay the capital gain fees in the states (15%) and then pay the 10% difference here in Germany. Is this true and how do we pay this exactly?

 

3. The tax consultant (Steurberater) told me that inheritance is only charged when it is >400,000 euro from a parent and >200,000 form a grandparent, I believe this to be true but did not find any information on this. 

 

4. Are we allowed to keep our American Banks open?

 

Any info is greatly appreciated as this is not easy to find and is very new to me, although I have searched for hours on end and spoken to many people. 

 

Thanks! 

 

Frank

 

[aaron L 1]

Hi Frank,

 

I am in the exact same situation. I moved to Germany last year and am trying to file for the year of 2021. I couldn't find any info on what to do or how to do taxes in Germany and in the USA. I am have been calling different German CPA's who want >1,000 Euros as a base price which seems like a lot of money. 

 

I also have stocks/ETF's in the US and have been in Germany for a little over a year, I live in the Cologne area and have been trying to contact different CPA's here, without any luck from someone who has done this many times before.

 

I just posted shortly ago to hopefully get some answers here: https://www.toytowngermany.com/forum/topic/391605-american-doing-taxes-for-usa-and-germany-with-stocks-and-etfs-that-generated-dividends/#comment-3914642

 

 

Have you found out any information about this since you posted this in September of 2021? I would greatly appreciate it as I am totally lost with this subject although I have spent many hours attempting to find more info about taxes. 

 

Thanks!

 

Aaron

[fraufruit 40,215]

Try typing "taxes on U.S. stocks" in the search bar.

 

There are oodles of threads on this subject.

[jeba 4,189]

On 19.9.2021, 11:28:34, frankmuller said:

What I did find out from Charles Schwab, which may or may not be true, is that if we already have ETFS then we can keep them, but we are not allowed to by new ones due to an American law.

 

From what I (former resident in Germany and now EU resident) remember being told when I tried in vain to buy certain US securities like ETNs was that it´s actually not an American but rather an EU law prohibiting me from buying. Most things you can buy as an EU resident though. However, this will trigger US withholding tax which can be as high as 37% (used to be 39% before Trump), e.g. in the case of distributions of MLPs.

 

You may have a problem filing your German taxes if you´re using a US broker. German banks/brokers will usually handle the tax aspect on your behalf by subtracting whatever tax you owe to Germany from dividends received from what they´ll pay out to you. They won´t help you with US taxes though. There are brokers in Germany who are using US brokers (or rather their European branches) as their backoffice (e.g. Lynxbroker is using the Irish branch of Independent Brokers) so you can trade at US stock exchanges. Many German banks/brokers will allow you to trade there as well, but sometimes you can´t trade all securities you can trade via a US broker.

 

For common ETFs like e.g. those tracking the S&P 500, there are European equivalents which are subject to EU regulation and can make things easier taxwise. With US ETFs or CEFs there may be a problem if they don´t fulfil European requirements such as reporting (in the way European regulators want it reported) which part of their dividend is actually return of capital, and you may even be taxed on fictitious profits you never had (as capital gains will be assumed even if there were none). In those cases, you´ll be taxed as if all of it was taxable income, even if it wasn´t. What is important in case you decide to transfer your portfolio to a German broker is to have proof of your purchase cost. Otherwise, you´ll be charged capital gains tax as if you had bought them for zero.

 

On 19.9.2021, 11:28:34, frankmuller said:

I read that the tax rate is a straight 25% here in Germany for all stocks. I found out from someone that we would pay the capital gain fees in the states (15%) and then pay the 10% difference here in Germany. Is this true and how do we pay this exactly?

That´s almost correct. The tax rate is 25% plus the solidarity surcharge of 5% of those 25%, resulting in a total of 26.xx%. Your German broker or bank will withhold it from you and pay it directly to the Finanzamt (German equivalent of the IRS). Be aware that capital gains are taxed at the same rate as dividends.

 

[aaron L 1]

4 hours ago, jeba said:

You may have a problem filing your German taxes if you´re using a US broker.

Hi Jeba thanks for all of your info. Just wanted to clarify what you mean by having a problem when filing my German taxes. Let's say you have Charles Schwab or Fidelity in the states, are you saying the Steuerberater would not be able to complete the tax return due to me having an American account? My US taxes will be done through TurboTax or possibly a CPA in the States so that shouldn't be an issue but any advice on which one to do first, the German taxes or American taxes?

 

As far as transferring my portfolio to a German one, that seems a bit risky due to the high costs of buying stocks in Germany and inability to retain ETF's. Have you had experience with this and would there be a recommendable German broker or bank that you have? Assuming this would be through a bank/broker in Germany. I have been reading that you have to pay for each transaction, being buying stocks and such.

 

Let's say then that I transferred my portolio here to Germany, I would still need to pay the US the 15% correct? Then I would somehow have to get that money over to the States, to the IRS in a check format. 

 

Thanks for your help! I really appreciate it! 

[jeba 4,189]

1 hour ago, aaron L said:

Just wanted to clarify what you mean by having a problem when filing my German taxes

I meant that you´ll have to do it yourself or hire an accountant whereas, if you used a German bank they would take care of your taxes on dividends, distributions and interest, as far as Germany is concerned (you wouldn´t even have to file that income in Germany anymore, unless you hope for a refund). From what I remember when I was looking for an accountant for a friend´s friend who is a US citizen, the cheapest accountant familiar with US taxation charged more than $900.- . One problem with what´s called "intransparent funds" is (if I understand correctly) that they don´t declare what part of the dividends is taxable under German rules. That means you may be taxed on fictitious profits, even if you didn´t have any. I don´t know whether an accountant can sort that out.

I think Pandamunich (a forum member who is an accountant herself) explained that a year or so ago. Maybe, if you´re lucky, she will see this thread and jump in. Or you´ll find her postings on that using the search function.

I´m using Lynxbroker.de. They are basically an extension of Independent Brokers and yes, they do charge per transaction. There are cheaper German brokers though (e.g. https://de.scalable.capital/) which charge a flat fee (I think around € 3.-/month) for unlimited transactions and will probably do your German tax work (can´t tell for sure as I´ve never used them and don´t live in Germany anymore.

[Starshollow 6,066]

As long as you have investment funds (ETFs or actively managed funds - no difference there) in the US, i.e. US-domoziled funds where the ISIN begins with us-xxxxx, you are out of trouble with the IRS. In Germany for taxation reasons you'll have to do some paperworks, but since the last changes of the relevant tax laws, foreign investment funds are being dealt with by the German tax authorities like German or EU-domiziled funds:
1. value of fund at the beginning of the year

2. compared to the value of the fund at the end of the year

3. including dividends and interest reinvested or not paid out

4. differed by 100% stocks cvs 100% bonds vs mixed-investment funds (different percentages of taxation apply)

 

A good German tax advisor should have no problems with your foreign funds, but it is extra paperwork so probably extra fees apply. I would imagine..

 

What you can't and never should do is buy non-US-domiziled funds. while their taxation may be a wee bit easier in Germany, they'll cause you tons of headache and, worse than that, costs in fees for US-based tax-accountants because the IRS considers these foreign investment funds as PFICs. And the taxation for PFICs is a nightmare in reporting and thus in fees to pay.

 

Cheerio

 

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