How does the taxation of capital gains work?
January 13, 2023 | 50,00 EUR | answered by Ulrike Voss
Dear lawyer,
My name is Babette Knorr and I have a question regarding the taxation of capital gains. I have been investing as an investor for some time and have invested in various securities. I have heard that capital gains are taxable, but I am unsure of how exactly the taxation works.
Currently, I have already made some profits from my investments and I am wondering if and how I need to declare and pay taxes on them. I want to ensure that I fulfill all my tax obligations and do not encounter any issues with the tax authorities. Therefore, I am looking for information on the taxation of capital gains.
My concern is that I may need to pay back taxes or receive penalties for tax offenses if I do not act correctly. Therefore, it would be very helpful for me if you could explain to me how the taxation of capital gains works and what steps I, as an investor, need to take.
Can you please provide me with the various types of capital gains that are taxable, as well as explain the corresponding tax rates and exemptions? Are there certain investment products that are tax-advantaged? What documents do I need to prepare for my tax return and what deadlines do I need to observe?
Thank you in advance for your help and support. I look forward to hearing from you.
Sincerely,
Babette Knorr
Dear Mrs. Knorr,
Thank you for your inquiry regarding the taxation of capital gains. It is understandable that you would like to inform yourself about your tax obligations as an investor in order to avoid potential issues with the tax authorities. I am happy to explain to you in detail the key aspects of the taxation of capital gains.
In Germany, capital gains are generally subject to taxation. This includes interest, dividends, capital gains from securities sales, as well as gains from investment funds or rental income. The taxation is usually done through a flat-rate withholding tax of 25%, which is deducted directly by the bank or issuer and remitted to the tax authorities.
However, there are also exceptions and tax-free allowances to consider. For example, there is an annual tax-free allowance of 801 euros (for married couples 1,602 euros) for capital gains, which remains tax-free under certain conditions. Additionally, there are tax-optimized investment products such as special savings accounts or investment funds that can offer tax advantages.
For your tax return, you will need to gather all relevant documents, such as account statements, annual certificates from banks or securities accounts, and proof of capital gains earned. The deadline for submitting the tax return is usually July 31 of the following year, but it can be extended.
It is important to accurately report all capital gains and, if necessary, pay any additional taxes to avoid issues with the tax authorities. If you have any uncertainties or more complex situations, I recommend consulting a tax advisor or specialist in tax law to ensure that you fulfill all your tax obligations.
I hope this information is helpful to you and I am available for any further questions. Thank you for your interest and attention.
Sincerely,
Ulrike Voss, Attorney specializing in Tax Law
