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Taxing share profits: This is how it works

Especially in the long term, stocks are an investment that promises high returns. Although stocks are always associated with a certain risk due to price fluctuations, if you invest the money over 20 to 30 years, you usually end up with a decent profit despite fluctuations.

But: Share profits and dividends must generally be taxed - with the final withholding tax plus solidarity surcharge and, if applicable, church tax. German investors typically pay between 26.38 percent and 27.99 percent tax on stock gains and dividends. Because it depends on whether you as an investor are a member of a church and in which state you live. However, there is also an allowance. If your share profits and dividends stay below this allowance, you don't have to pay any taxes. More on that in a moment.

Stock gains are withheld right at the source

The final withholding tax is a withholding tax: For you and all other equity investors, this means that you do not have to worry about taxation yourself. As the source of your price gains, the credit institute will automatically do this for you. Your bank also offsets profits and losses directly, so you only have to pay taxes on the difference.

By the way

At the end of 2019, the legislature passed new regulations on the tax treatment of offsetting losses from forward transactions. Some of these have been in effect since January 1st, 2020 and bring investors disadvantages with regard to tax. You can find out more about this in our article Losses from futures: That is changing.

Tax allowance helps save on taxes

The good news for small investors is that stock gains and dividends of up to € 801 for singles and € 1,602 for married couples remain tax-free. This only works if you have given your bank a so-called exemption order. Otherwise the taxes will be deducted. If it has come to this, you don't have to worry. You can get back your overpaid taxes with a tax return.

If your income is below the basic tax-free allowance, a non-assessment certificate could also be of interest to you. Put simply, you don't have to pay taxes with a non-assessment certificate, even if your share profits and dividends exceed 801 euros.

By the way:

Do you need professional support in terms of share profits and tax returns? Our advisors will prepare your tax return and guarantee you the benefits that you are entitled to. You can find an advice center near you here: Consultant search.

Share gains: Sale of old stocks may still be tax-free

If you bought the shares in your custody account before 2009, you still have so-called old stocks. You can sell these old stocks at a profit and do not have to pay any taxes. But be careful: The principle of "first in, first out" applies to gains in shares. The shares bought first are also sold first.

Let's say you bought Company X shares in 2008 - exactly 150. A year later, in 2009, you buy another 150 shares. These 300 shares in total will remain in your portfolio until you decide in 2018 to sell 200 of them. The share gains from the first 150 shares remain tax-free because you bought these shares in 2008. You have to pay withholding tax on the share gains from the remaining 50 shares because these shares were purchased in 2009.

 

This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the advisory authority according to § 4 No. 11 StBerG.