In this guide we will explain the typical sources of income from investment and what to look for in your income tax return. The good news is that declaring income from investments is easier than you think.
Types of income from investments
In general income from investments includes e.g. dividends or interest from
Investing into stocks, ETFs and mutual funds
Investing in Cryptocurrencies
The detailed list is available in § 20 EStG.
When to declare this type of income?
Income from Investments through German financial institutions
Due to the introduction of the final tax (Abgeltungssteuer), it is no longer necessary to declare income from investments made using German financial institutions on your income tax return.
For a detailed overview of your income from investments you will receive a tax certificate from your financial institution.
Income from investments of up to €800
With an exemption order (Freistellungsauftrag) at your financial institution, you can receive the so-called saver's allowance (Sparer-Freibetrag) in the amount of € 801 per year. This means that income from investments is tax free until the amount of € 801.
Please note that you have to apply for it every year again. Usually your financial institution sends the application out every year. If you want to apply for it, you should contact your bank directly. They will send the form to you.
Income from Investments with financial institutions outside of Germany
Income from investments like dividends or interest coming from selling stocks or bank savings with a financial institution outside of Germany need to be declared in the income tax statement on annex KAP as these financial institutions don’t submit taxes directly to the German tax authorities.
Income from Investments from cryptocurrencies
From a tax perspective, cryptocurrencies are not a currency. The purchase and sale is therefore not subject to the final tax (Abgeltungssteuer).
From the point of view of the tax office, the income resulting from trading with cryptocurrencies is comparable to gains on artworks or precious metals like gold or silver.
If you have owned Bitcoins yourself for more than one year, the sale is tax-free. The amount of the profit doesn’t matter and you do not have to declare it in your tax return.
If you have sold the Bitcoins within twelve months after the purchase, profits up to an exemption limit of 600 euros are tax-free. From 600 euros, the profit must be taxed in full. If your profit is even 1 Euro higher, you are obliged to pay tax on the entire profit.
Usually your bank already declares the taxes from your investments automatically to the tax office. This means in most cases you don’t have to declare income from investments within your income tax return.
Income from investments from german bank accounts is tax free until € 801 when you apply for the saver's allowance (Sparer-Freibetrag).
If you have income from investments from foreign accounts you have to file the KAP annex of the income tax return.
Sorted tax guides are provided without liability and do not replace a tax advisor.
To get an accurate answer for your specific case, please consult a tax advisor.
You can always ask one of tax advisors on the Sorted platform.