If you invest in German markets or are curious about how other countries tax capital gains, the Abgeltungssteuer is worth understanding.
Since 2009, Germany applies a flat 25% withholding tax on all investment income — capital gains, dividends, and interest. On top of that comes a 5.5% solidarity surcharge (calculated on the tax, not the gain), bringing the effective rate to 26.375%. Church tax members pay an additional 8–9%, pushing the rate to roughly 27.8%.
Your broker withholds the tax automatically — no manual filing needed in most cases.
The good news: German investors get a €1,000 annual tax-free allowance (Sparerpauschbetrag). Only earnings above this threshold are taxed, provided the investor has filed a Freistellungsauftrag (exemption order) with their broker.
Understanding how different countries tax investment income helps you think globally about portfolio returns.