Reducing tax on DE savings interest…Freibetrag?

[emkay 10,339]

Many years ago, I remember something about earning savings interest tax free up to a certain limit. Split between couples in varying proportions. Or, did it just mean that savings aren’t taxed at source ie automatic deduction of ca. 25% when DE banks pay savings interest? Not sure if I’ve been Googling correctly. 

 

Now that UK banks and building societies are closing accounts for non UK residents, I need to transfer some funds to DE. Is there really a DE tax free interest amount available? If so, how does one obtain the authorisation to give to the savings account bank?

 

Any advice would be very much appreciated. 

[Paul@CRCIE 58]

Hi Emkay, 

 

You now have €1000 per annum for a single person or €2k which is the tax exempt Freibeitrag. 

 

The bank or institution where you park your money will give a Freistellungsauftrag, which means the tax exempt amount will apply to that account. 

 

Interest rates are still crap in Germany, compared to UK, leaving it on deposit is just like leaving ice out in the sun at the moment. 

 

Paul

[emkay 10,339]

44 minutes ago, Paul@CRCIE said:

Hi Emkay, 

 

You now have €1000 per annum for a single person or €2k which is the tax exempt Freibeitrag. 

 

The bank or institution where you park your money will give a Freistellungsauftrag, which means the tax exempt amount will apply to that account. 

 

Interest rates are still crap in Germany, compared to UK, leaving it on deposit is just like leaving ice out in the sun at the moment. 

 

Paul

Thank you Paul. That doesn’t sound difficult. I had the impression that that bank where funds are ‘parked for now’ need some kind of document from elsewhere to do so. Maybe as I’m married and the couple allowance can be shared?

 

My former UK bank and building society are insisting on account closure as I’m non UK resident. Even their current savings accounts offer very minimal interest. I don’t qualify to open any other UK savings/ISA accounts. Hence, I would like to transfer to DE and ‘park’ into a Tagesgeld account until I find better options. Barclays.de are offering 3.11% for 6 months….sure to reduce thereafter. Bank of Scotland 1.5% with occasional 1-3 months extra. 
 

Yes, definite melting in the sun going on for the last 1-2 years! Not to mention UK private pensions nosediving after Ms Trusses budget last year!

 

[murphaph 9,854]

My tip: Open a trading account with Trade Republic. You don't need to buy any shares or any of that. Their cash account currently pays 2% APR and it's paid monthly. I don't believe any German Tagesgeld comes close to that at the moment (excluding introductory offers that have to keep jumping from every few months, like your Barclays example):

 

https://traderepublic.com/de-de/zinsen

 

Trade Republic allow you to submit the Freistellungsauftrag online (as do many banks these days). The sign up procedure is easy, with identity verified by video call. The only "downside" is that it takes a few days to transfer money in and out. This is because the money is not held by TR directly, but with a "proper" bank with deposit guarantee scheme. In my care the funds are with JP Morgan in Frankfurt, but that could be Deutsche Bank, also in Frankfurt or CitiBank in Dublin (Ireland has the same 100k deposit gurantee scheme as Germany). You get assigned a random bank. It's all free to use.

 

[PandaMunich 16,909]

37 minutes ago, murphaph said:

Their cash account currently pays 2% APR and it's paid monthly. I don't believe any German Tagesgeld comes close to that at the moment

You might want to look again: https://www.modern-banking.de/vergleich-tagesgeld-10.php

In the above link, I did not click on "Sonderzinsen berücksichtigen", so you see the list without special "new client" offers.

[murphaph 9,854]

Thanks Panda you're right, things have changed quite a bit in the past couple of months it seems! I am interested in that BMW bank 3% rate now ;-) 

[Eric7 555]

39 minutes ago, murphaph said:

Thanks Panda you're right, things have changed quite a bit in the past couple of months it seems! I am interested in that BMW bank 3% rate now ;-) 

 

I applied for the BMW one this morning but as yet haven't got any confirmation. It could theoretically go higher than 3% with the ECB rise. The interest is only credited yearly but that's a minor thing really.
Trade Republic is a simple one to set up, like you said, but it's only 2% up to €50k I think.
Volkswagen Bank is offering 3.11% for 6 months but seem to be drowning under the flood of applicants.

 

I've gone through the process for BMW, Barclays & VW but only have cash in Trade Republic so far.
There seems to be a new offer every day at the moment.

[Eric7 555]

@murphaph strangely, I transferred some more cash into my Trade Republic account this evening and it was there within 10 minutes.
The last couple of times it has taken until the next day.

[murphaph 9,854]

I've applied for BMW too but can't do the video ident just now. Will complete it in the morning and see how it goes. I'm parking a good few grand in TR at the moment so 50% more interest interests me lol. I thought TR would try to maintain a competitive advantage over the banks but they don't seem to have the marketing budget for it or just don't need to attract more deposits.

[MattW 10]

I've got a Revolut account with an instant access savings Vault of 2.1% for Euro paid daily. If you travel then alot of useful stuff on top as well + a slick APP

[murphaph 9,854]

I've done the BMW ident thing. Will move my parked money there if the rate stays like that. It's a full percent above the TR rate. It was a shame Rabobank left Germany. They always had decent rates.

[emkay 10,339]

Another question re the (Steuer)Freibetrag…if as mentioned above, the DE bank where funds are transferred to provide the Freibetrag, what happens if say after the first 6 months of the best rate ca. 3%+ reverts back to the existing customer rate of around 1.2% as seems to be the case with Barclays.de. Would another bank give another Freibetrag? If the amount for couples is 2000€ per year, can this be split in different proportions?

[Eric7 555]

19 minutes ago, murphaph said:

I've done the BMW ident thing. Will move my parked money there if the rate stays like that. It's a full percent above the TR rate. It was a shame Rabobank left Germany. They always had decent rates.

 

Did you get any confirmation afterwards, or any indication at all that an account is being set up?

[murphaph 9,854]

Yeah immediately after the ident call I got an email from BMW Bank saying:

Quote

Sehr geehrter Herr Murphaph,

herzlichen Glückwunsch! Sie haben den Kontoeröffnungsantrag elektronisch signiert und sich erfolgreich legitimiert.

Sie haben noch Fragen? Antworten zu den häufigst gestellten Fragen finden Sie hier.

Mit freundlichen Grüßen

Ihre Kundenbetreuung der BMW Bank

I already got an email that told me the login details will be sent by post so I'm waiting for those now.

[murphaph 9,854]

1 hour ago, emkay said:

Another question re the (Steuer)Freibetrag…if as mentioned above, the DE bank where funds are transferred to provide the Freibetrag, what happens if say after the first 6 months of the best rate ca. 3%+ reverts back to the existing customer rate of around 1.2% as seems to be the case with Barclays.de. Would another bank give another Freibetrag? If the amount for couples is 2000€ per year, can this be split in different proportions?

You can split it whatever way you like but you need to be careful not to assign more than the 2k in total as the banks report these figures back to a central station which adds them up and lets the Finanzamt know if you have exceeded your allowance. That's asking for an audit on the rest of your taxes.

 

The banks don't give you the freibetrag, you instruct the bank which freibetrag to apply to you (usually acrosss all the accounts you hold with them). Also, If you tell bank A to use a freibetrag of 100€ and then you earn interest of €50 and then close your accounts with that bank, you need to remember not to assign that "used" €50 again during the tax year to any other bank. This is important to remember if you start hopping around to get the best interest rate using introductory offers.

[Paul@CRCIE 58]

Can I ask why the interest in parking cash at 3%? Is this cash you need in the near future or why do you feel 3% is somewhere you'd want to invest?

[murphaph 9,854]

Yes it's cash I have a specific use for in the next year or two. It's too risky for me to stick it in to ETFs (which is where I invest long term money) as 2022 showed. It's not an investment at 3%, just "parked" for a while and I'd rather 3% than 2% on it.

[SunshineMarty 11]

If you wanted to keep some in GBP or US$ you could always try offshore with someone like Skipton international. Are there better DE based options for this?

[murphaph 9,854]

On 05/05/2023, 18:00:15, Eric7 said:

 

Did you get any confirmation afterwards, or any indication at all that an account is being set up?

First bit of paperwork arrived today. Everything is set up but they send two pins under separate cover. Waiting for the second pin to arrive before I can use the account.

[Eric7 555]

3 hours ago, murphaph said:

First bit of paperwork arrived today. Everything is set up but they send two pins under separate cover. Waiting for the second pin to arrive before I can use the account.

 

I didn't get anything after the identity video thing so I guess something went wrong somewhere.
Also still nothing from VW, the useless shower.
Barclays is up and running though, with cash already deposited.