Understanding the "Freistellungsauftrag" is key for anyone dealing with capital gains in Germany. This guide simplifies the tax exemption order, covering its purpose, the exemption amount, requirements for setting it up, and special considerations for couples. It's an essential read for efficiently managing your capital gains tax obligations in Germany.
Purpose of "Freistellungsauftrag"
The Freistellungsauftrag allows you to receive capital gains like interest, dividends, and profits from stock and fund sales without the deduction of capital gains tax (Abgeltungssteuer) up to a specified limit.
Exemption Amount (Freibetrag)
As of 2023, each individual can exempt up to €1,000 of their capital gains from taxation. This limit was increased from €801 in 2022. For married couples or registered life partners, this amount is doubled to €2,000. [1] Further details on this are provided below in the section 'Arrangements for Married Couples and Life Partners'.
If you have multiple bank accounts, you need to distribute this exemption amount across your accounts without exceeding the total limit.
Requirements for Setting Up a Freistellungsauftrag
You'll need your tax identification number (Steueridentifikationsnummer) to set up a "Freistellungsauftrag" with any financial institution in Germany.
To apply for a tax exemption order, approach the bank or the financial institution where your investments are held. Generally, these institutions provide a specific form for this purpose, which you simply need to complete and submit. By default, the tax exemption order is valid for one calendar year. However, you have the option to extend its validity indefinitely. [2]
Arrangements for Married Couples and Life Partners
Couples can either submit a joint Freistellungsauftrag or individual ones. In the case of a joint Freistellungsauftrag, both partners need to sign. For individual orders, only one signature is required.
There is also an option for cross-spousal loss offsetting ("ehegattenübergreifende Verlustverrechnung") where the bank offsets gains and losses from various accounts and deposits of both partners over a year.
Important German Terms and Their English Meanings
Here's a table outlining key German terms commonly found in Freistellungsaufträge and their English translations:
German Term | English Translation |
Freistellungsauftrag | Tax Exemption Order |
Abgeltungssteuer | Capital Gains Tax |
Freibetrag | Exemption Amount |
Steueridentifikationsnummer | Tax Identification Number |
(Ehegattenübergreifende) Verlustverrechnung | (Cross-Spousal) Loss Offsetting |
Kapitalerträge | Capital Gains |
Sparerpauschbetrag | Savings Allowance |
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