Withholding tax, exemption order and withholding tax
If you earn investment income from the sale of stocks and funds, or generate dividends , you are usually obliged to pay a withholding tax on the investment income. You can and should give your broker or bank a so-called exemption order. If you are a customer of several banks, you can divide your allowance among them. As a single, the amount of your exemption is 801 euros, if you are married, then it is 1602 euros per calendar year. If this exemption has been exhausted, the withholding tax is due for the investment income (beyond the exemption). The amount of the withholding tax is currently 25% plus the solidarity surcharge of 5.5%, so you pay a total of 26.375% (as of 2020). The final withholding tax is then paid directly from your bank or broker to the tax office.
A small sample calculation for a single with an allowance of 801 euros
You will receive a dividend of 1000 euros
1000 euros minus the tax exemption (801 euros) = 199 euros
25% capital gains tax of 199 euros = 49.75 euros
+ 5.5% solidarity surcharge of 49.75 euros = 2.74 euros
Accordingly, 52.49 euros are to be paid in taxes
Of the € 1,000 dividend, € 947.50 remains
Have you invested in foreign stocks, funds or ETFs and received a dividend? Then a so-called withholding tax is due, which is determined by each country itself. In the US it is currently 30%. Fortunately, the US and Germany have a double taxation treaty, so only 15% is due. This 15 percent will be retained by your bank and paid accordingly.