Exemption order
Important information for investors*
- The exemption order enables tax-free investment income
- Every taxpayer is entitled to a tax-free allowance of 1,000 euros per year
- Exemption amount does not apply per account, but for all investment income
- *Taxable in Germany
In Germany, tax law offers investors the opportunity to receive their investment income tax-free up to a certain amount: the so-called exemption order. This article explains what an exemption order is and how it works.
What is an exemption order?
An exemption order is a form that investors submit to their bank or financial services provider to apply for tax exemption on investment income. Investment income includes interest, dividends, gains from the sale of securities and other income resulting from the invested capital. The exemption order ensures that this income is not subject to final withholding tax up to a specified exemption amount.
The final withholding tax is 26.375% (including solidarity surcharge and, if applicable, church tax). The exemption order prevents this tax from being automatically paid on investment income up to a certain tax-free amount.
Allowances and use of the exemption order
Every taxpayer is entitled to an exemption amount of 1,000 euros per year (for single persons) or 2,000 euros per year (for married couples or registered partnerships). This means that investors can receive up to this amount of investment income tax-free as long as the exemption order has been issued accordingly.
It is important to know that the exemption amount does not apply to each account, but to all investment income. So if you have several accounts with different banks or financial service providers, you must distribute the exemption order in such a way that the total exemption amount is not exceeded. Otherwise, taxpayers may have to pay tax on the income in excess of the exemption amount.
How does the exemption order work?
To issue an exemption order, investors must submit the relevant form to their bank or financial services provider. This form is usually made available online. The exemption order can be issued for any account or custody account that the taxpayer holds with the respective bank.
The taxpayer must renew the exemption order annually if they wish to continue to benefit from the tax exemption. As a rule, the exemption amount is distributed directly by the bank, which then only withholds tax on capital gains if they exceed the exemption amount.
Conclusion
The exemption order is a simple and effective means of tax optimization for investors. We will be happy to answer any questions you may have.
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