# Abgeltungsteuer

Part of a series on :
Taxation :
An aspect of fiscal policy :
Policies
Government revenue
Property tax equalization
Tax revenue
Non-tax revenue
Tax law
Tax bracket
Flat tax
Tax threshold
Exemption
Credit
Deduction
Tax shift
Tax cut
Tax holiday
Tax amnesty
Tax advantage
Tax incentive
Tax reform
Tax harmonization
Tax competition
Tax withholding
Double taxation
Representation
Unions
Medical savings account :
Economics
General Theory
Price effect
Excess burden
Tax incidence
Laffer curve
Optimal tax
Theories
Optimal capital income taxation
Distribution of Tax
Tax rate
Flat
Progressive
Regressive
Proportional :
Collection
Revenue service
Revenue stamp
Tax assessment
Taxable income
Tax lien
Tax refund
Tax shield
Tax residence
Tax preparation
Tax investigation
Tax shelter
Tax collector
Private tax collection
Tax farming :
Noncompliance
General
Tax avoidance
Repatriation tax avoidance
Tax evasion
Tax resistance
Tax shelter
Debtors' prison
Smuggling
Black market
Unreported employment
Corporate
Tax inversion
Transfer mispricing
Base erosion and profit shifting (BEPS)
Double Irish
Dutch Sandwich
Single Malt
CAIA
Locations
Tax havens
Corporate havens
Offshore financial centres (OFCs)
Offshore magic circle
Conduit and sink OFCs
Financial centres
Financial Secrecy Index
Major examples
Ireland as a tax haven
Ireland v. Commission
Leprechaun economics
Liechtenstein tax affair
Luxembourg Leaks
Offshore Leaks
Paradise Papers
Panama Papers
Swiss Leaks
United States as a tax haven
Panama as a tax haven :
Types
Direct
Indirect
Per unit
Ad valorem
Aviation
Airport improvement
Landing
Solidarity
Capital gains
Expatriation
Consumption
Departure
Hotel
Sales
Stamp
Television
Tourist
Value-added
Dividend
Environmental tax
Carbon
Eco-tariff
Landfill
Natural resources consumption
Severance
Steering
Stumpage
Excise
Alcohol
Cigarette
Fat
Meat
Sin
Sugary drink
Tobacco
General
Georgist
Gift
Gross receipts
Hypothecated
Income
Inheritance (estate)
Land value
Luxury
Payroll
Pigouvian
Property
Resource rent
Single
Surtax
Turnover
Use
User charge/fee
Congestion
Fuel
Road/GNSS
Toll
Vehicle miles traveled
Corporate profit
Excess profits
Windfall
Negative (income)
Wealth :
International
Financial transaction tax
ATTAC
Currency transaction tax
European Union Common Consolidated Corporate Tax Base (CCCTB)
Global minimum corporate tax rate
Robin Hood tax
Tobin tax
Spahn tax
Tax equalization
Tax treaty
Exchange of Information
Permanent establishment
Transfer pricing
European Union FTT
Foreign revenue rule :
Trade
Custom
Duty
Tariff
Import
Export
Tariff war
Free trade
Free-trade zone
Trade agreement
ATA Carnet :
Research
Academic
Mihir A. Desai
Dhammika Dharmapala
James R. Hines Jr.
Ronen Palan
Joel Slemrod
Gabriel Zucman
Advocacy groups
Institute on Taxation and Economic Policy (ITEP)
Oxfam (UK)
Tax Foundation (US)
Tax Justice Network (TJN)
Tax Policy Center (US) :
Religious
Church tax
Eight per thousand
Teind
Tithe
Fiscus Judaicus
Leibzoll
Temple tax
Tolerance tax
Jizya
Kharaj
Khums
Nisab
Zakat :
By country
All Countries
List of countries by tax rates
Tax revenue to GDP ratio
Tax rates in Europe
Individual Countries
Albania
Algeria
Argentina
Armenia
Australia
Azerbaijan
Bangladesh
Bhutan
Brazil
Bulgaria
BVI
Canada
China
Colombia
Croatia
Denmark
Finland
France
Germany
Greece
Hong Kong
Iceland
India
Indonesia
Iran
Ireland
Israel
Italy
Japan
Kazakhstan
Lithuania
Malta
Morocco
Namibia
Netherlands
New Zealand
Norway
Pakistan
Palestine
Peru
Philippines
Poland
Portugal
Russia
South Africa
Sri Lanka
Sweden
Switzerland
Taiwan
Tanzania
United Arab Emirates
United Kingdom
United States
Uruguay :
Business portal
Money portal :
vte :
The Abgeltungsteuer (German, from Abgeltung "settlement", "discharge" + Steuer "tax") is a flat tax on private income from capital. It is used in Germany, Austria, and Luxembourg.

## Germany

In Germany, the Abgeltungsteuer was introduced through the German Corporate Tax Reform Act of 2008 [de] that passed the German Parliament on 14 August 2007. The Abgeltungsteuer became effective on 1 January 2009.

### Earlier tax law

In 2009 the Abgeltungsteuer replaced the half revenue procedure [de] that had been effective since 2001.
The German Income Tax Act [de] had a procedure whereby taxable income was halved for purposes of dividend taxation. Fifty percent of income, as defined in article 3 number 40 of the Tax Act as amended in 2008, was exempt from income tax. Dividends and taxable capital gains from the sale of investments were taxed (if a certain exemption limit was exceeded) at only half the rate of income tax and solidarity surcharge tax [de]. Profits from the sale of equity investments were not taxable if they were held for over a year.
The half revenue procedure was moot as of 1 January 2009 with the passage of the new Abgeltungsteuer (Article 32 of the German Income Tax Act).

### Who is liable

The taxation at the level of a shareholder (shareholders or partners) depends on whether the shareholder is an individual or a corporation:
   * If the shareholder is an individual, the distribution as dividend falls under the Abgeltungsteuer with a flat rate of 25 % plus a 5.5 % solidarity surcharge.
   * If the shareholder is a partnership, dividends and taxable capital gains from equity investments are 40 % exempt from taxation. (Art. 3 No. 40 German Income Tax Act as amended of 2009). This is called the partial income method [de] and replaced the half revenue procedure for shareholders of partnerships. Accordingly, income from dividends and capital from the sale of company shares that are held as business assets are no longer subject to 50 % taxation (half income method) but now taxed with 60 % of the individual income tax rate. The revenue-related expenses can also be considered tax deductible of 60 %.
   * If the shareholder is a corporation, dividends and taxable capital gains from equity investments are exempt from taxation (Art. 8 b Para. 1 German Corporation Tax Act). In its tax assessment, merely 5 % of the dividends are added to profits as non-deductible operating expenses (Art. 8 b Para. 5 German Corporation Tax Act).

### Amount of withholding tax

The Abgeltungsteuer is levied as a withholding tax. Private investor’s tax liability is settled. The already taxed capital gains are no longer recorded in the annual income tax return. Instead of taxing with the personal tax rate of taxpayers, their income regardless of their height is taxed with the flat tax rate of 25%. The legal basis for this was amended in the Unternehmensteuerreformgesetz of 2008 in Art. 32 d of the German Income Tax Act. The withholding tax rate according to Art. 43 a Para. 1 German Income Tax Act is 25% plus solidarity surcharge of 5.5% on the final withholding tax and possible church tax (8 or 9% of the flat tax). This makes a total of Abgeltungsteuer of 26.375% church tax excluded. The surplus income from capital assets cannot be shortened by the overall deductions through lump sum or actual expenses. In their place, the saver's allowance in the amount of 801 € will be used as deduction (Art. 20 Para. 9 German Income Tax Act). However actually there are several decisions in court to rule on that restricted deduction possibility.

### What is taxable
#### Taxable current income

Among the investment income are (Art. 20 Para. 1 German Income Tax Act):
   * dividends
   * interests
   * income from investment funds and certificates
   * nearly all earnings from capital assets
   * private capital gains
   * covered options and other payments from securities and derivatives
This means, profits which have been recorded and taxed only in the context of speculation are now already taxable for a holding period of more than one year.

#### Taxable private capital gains

Taxable private capital gains are (Art. 20 Para. 2 German Income Tax Act):
   * the sale of shares of a corporation (stock or share of business)
   * the sale of coupons (dividends or interest)
   * the profit of forward transactions
   * the sale of a stake on a company or a quiet participating loan
   * the transfer of rights on mortgages, mortgages and pensions
   * the sale of a capital life insurance and
   * the sale of other capital assets or a position of right

### Exemptions from the tax deduction

The rules for the Abgeltungsteuer do not apply for the following:
   * interest payments by corporations to shareholders with a participation of 10% or more, for back to back financing and loans between related parties. In those cases the earnings will be taxed with the individual tax rate.
   * gains from sale of shares in corporations, if the seller has been involved within the last five years at least with 1% of the capital. The income from business operations are subject to corporation tax and are taxed with the partial income method.
   * capital gains incurred in the course of a business activity.
   * at request for capital gains from investments in a corporation. The participation must be at least 25%, in professional work for the corporation 1% is enough. The request applies for the following four tax years unless it is revoked. After withdrawal of the application a new application for the same stake in the corporation is no longer possible. Upon successful application the partial income method applies.

### Alternatives

Investment income upon which flat rate tax was withheld do not have to be declared in the annual income tax return. Only if church tax has not been withheld or the personal income tax rate is below 25%. A tax refund on the difference between the tax rates is possible (Art. 32 Para. 6 German Income Tax Act). This makes sense when the personal tax rate of the income is below 25%. The intention was that the income on investment income will not be taxed higher than their other income. A withdrawal of actual costs associated with private capital gains is however no longer permitted, the saver's allowance in the amount of 801 € will be used as deduction.

### Losses

Losses are considered as follows:
    At first, positive and negative income will be charged. (e.g. dividends, interests income from investment funds and certificates). Losses from sale of shares can only be charged against gains from selling shares. Any remaining loss is carried forward by the bank on either next year or, at request of the customer be certified and may be used by other banks where the individual has positive investment income. Losses that occurred before 2009 can be charged up to 2013 with capital income.

### Foreign investment income

Investment income that was generated abroad also falls under the Abgeltungsteuer. The Federal Republic of Germany concluded with many countries double taxation agreements so that the regulations differ from each country to country. The aim is to avoid that one taxpayer is charged with similar taxes more than once on the same income for the same period. Though the Abgeltungsteuer is not applicable in foreign countries, the taxpayer has the responsibility to declare the income for taxation at the local tax office. Foreign taxes on capital gains are only chargeable up to a height of 25% according to German Income Tax Act (Art. 43 a Para. 3). Nevertheless, there can be possibility that losses from other securities transactions are added to the original loss. That leads to a paid tax on capital gains of more than 25% seen over the entire calendar year. Such a negative surplus will not been refunded by the tax authorities and is also not transferable to the following years.

### Advantages and disadvantages

* Taxpayers with middle and higher income who mainly receive income from capital gains have usually an advantage from this new method of taxation. The reason is the low flat rate of 25% instead of being taxed with the personal income tax rate. In Germany the highest personal income tax rate is 45%. Taxpayers with a small income have no disadvantage because of the alternative of being taxed with their personal income tax rate (see above). The lowest income tax rate starts at 14%.
* Another advantage or disadvantage depending on the view is the taxation of the sale of capital gains. Equity and investments funds are getting more unattractive through this kind of taxation. That only counts for new investments that were bought from 1 January 2009 on. All shares that were bought before that date do not fall under the new Abgeltungsteuer and are tax free when they were held more than 12 months.
* The flat rate tax rate of 25% is significantly lower than the highest income tax rate. Advantages only apply for investors whose marginal tax rate on the remaining income is equal or higher than the flat tax rate. There might be a breach of the principle of taxation based upon the competitiveness of the taxpayers. Before 2009 gains from capital income were taxed with 45% and from 2009 on are taxed with 25% plus 5.5% solidarity surcharge and church tax. That is the same for taxpayers with a personal income tax rate of 27%.
* The Abgeltungsteuer on capital gains leads to different taxation in comparison to the other income taxes that are based upon the personal tax rate (so called dualistic income taxation).

## Austria

In Austria, a withholding tax on capital income took effect on 1 January 1993. The legal basis for the tax is the Austrian final taxation law (Endbesteuerungsgesetz).

## Luxembourg

Since 2006, taxpayers who have tax liability in Luxembourg have been subject to a 15% flat rate withholding tax on interest income. For nonresident EU citizens who receive interest income from Luxembourg, a 20% tax rate applied through 30 June 2011, rising to 35% as of 1 July 2011 under the European Directive on the taxation of savings interest income.