Ask a tax advisor on the topic of Capital assets

ETF stands for Exchange-Traded Fund.

January 27, 2010 | 25,00 EUR | answered by Michael Herrmann

Dear Sir or Madam,

I would like to trade American ETFs (exchange traded funds - e.g. QQQQ or SPDR) with interactive brokers. How are these treated in terms of tax law?

Kind regards,
W. Schulz

Michael Herrmann

Dear questioner,

First of all, thank you very much for your inquiry, which I would be happy to answer based on the information provided by you and in the context of your initial consultation. The response is based on the description of the situation. Missing or incorrect information regarding the actual circumstances can affect the legal outcome.

Since ETFs are open-end mutual funds, the tax regulations of the Investment Tax Act apply, as with actively managed funds. The only difference lies in the composition of the securities held in the fund's assets.
The value of the ETF depends on the performance of the respective index. The taxation of fund income follows the general rules for investment income.

With the flat tax, the previously tax-free capital gains and losses are included in the category of "income from capital assets", so that securities acquired from 1 January 2009 onwards are subject to a flat tax rate of 25% regardless of the holding period. In practice, the provisions for securities transactions play a significant role in privately held capital investments. The sale of shares and share-like profit participation certificates is governed by § 20 (2) sentence 1 No. 1 of the Income Tax Act, while the sale of bonds and certificates is regulated in § 20 (2) sentence 1 No. 7 of the Income Tax Act.

The sale of investment shares cannot be directly classified under § 20 (2) sentence 1 No. 1 of the Income Tax Act, as investment funds are not to be attributed to the corporations or legal entities mentioned there that generate profit shares under § 20 (1) No. 1 of the Income Tax Act.
§ 8 (2) sentence 1 No. 7 of the Income Tax Act. § 8 (5) sentence 1 of the German Investment Tax Act therefore stipulates that gains from sales or redemptions of fund shares "belong to" income as per § 20 (2) sentence 1 No. 1 of the Income Tax Act.

You will surely notice that the topic is once again more complicated than the question would suggest.

In principle, all income, whether capital gains, distributions, or other proceeds, are covered in some way by § 20 of the Income Tax Act, so that all income is subject to taxation without time limits.

The domicile of the investment company, the storage location, or the location of the custodian bank are irrelevant for this assessment.

I hope that these explanations have given you an initial overview of the situation and remain

Yours sincerely,

Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax consultant