German taxation
Freistellungsauftrag: €1,000 of tax-free gains in Germany
It's the simplest and most forgotten setting among new investors in Germany. Five minutes in your online banking saves you paying tax on your first €1,000 of interest, dividends and capital gains each year.
1. The Sparerpauschbetrag: your annual allowance
Since 2023, the allowance on investment income (Sparerpauschbetrag) has been €1,000 per year per person, and 2 000 € for married couples or civil partners filing a joint return. It covers Tagesgeld interest, dividends, gains on sale and the Vorabpauschale of ETFs.
2. What is the Freistellungsauftrag for?
In Germany, the bank deducts tax at source: 25% Abgeltungsteuer plus a 5.5% solidarity surcharge on that tax, i.e. 26,375 %, plus church tax if you are liable. The Freistellungsauftrag tells the bank: "don't deduct anything up to this amount". You keep your money invested instead of recovering it a year later through your tax return.
3. How to fill it in
- Log in to your bank or broker and look for "Freistellungsauftrag" in the settings or tax profile.
- Enter your tax identification number (Steuer-ID), shown on your payslip or letters from the Finanzamt.
- Choose the amount : €1,000 if you only have one bank, or a split if you have several.
- As a married couple, you can give a joint order of up to €2,000, in the name of both spouses.
- Confirm. The change takes effect immediately for the current year.
4. Several banks: how to split it?
The total of all your orders must not exceed your allowance. Put the largest amount where you earn the most.
| Bank | What you hold there | Freistellungsauftrag |
|---|---|---|
| Online broker | ETF savings plan and stocks | 700 € |
| Savings bank | Tagesgeld (interest) | 300 € |
| Current-account bank | Current account without interest | 0 € |
| Total | 1 000 € |
Banks report the amounts used to the tax authorities: any excess is detected. Remember to adjust the split each year according to your actual income.
5. With ETFs, the allowance goes further
For an equity ETF, only 70% of gains are taxable thanks to Teilfreistellung. Your €1,000 allowance therefore covers about €1,428 of capital gains on equity ETFs, before any tax.
6. The January Vorabpauschale
For accumulating ETFs, the state taxes a notional minimum return every year, the Vorabpauschale, deducted in early January. For 2026, the base rate (Basiszins) is 3,20 %, of which 70% is used.
Example: an equity ETF worth €10,000 on 1 January 2026, up over the year, generates a Vorabpauschale of €224, of which €156.80 is taxable after Teilfreistellung.
With a Freistellungsauftrag, this amount is covered and you pay nothing. Without one, the bank deducts about 41 € from your current account in early January 2027.
So always keep a little money on your broker's reference account in January, and check that your Freistellungsauftrag is in place.
7. Forgot? Get the tax back
Don't panic: tax wrongly deducted can be recovered in your tax return, withAnlage KAP. Attach your bank's annual tax certificate (Jahressteuerbescheinigung). The Finanzamt refunds the part exceeding your entitlement.
8. Low income: the NV-Bescheinigung
If your total income for the year stays below the tax-free basic allowance (Grundfreibetrag of 12 348 € in 2026 for a single person), you can ask the Finanzamt for a Nichtveranlagungsbescheinigung. Given to the bank, it prevents any deduction, even above €1,000. This is often the case for students and apprentices.
If your personal tax rate is below 25%, also tick the Günstigerprüfung box in the Anlage KAP: your investment income will then be taxed at your lower rate.
9. What about children?
Each child has their own €1,000 Sparerpauschbetrag. For an account in the child's name (Kinderdepot), the parents sign the Freistellungsauftrag on their behalf. Gains in the child's account often remain completely tax-free.
10. Diaspora: if you leave Germany
The Freistellungsauftrag is reserved for people taxable in Germany. If you move abroad, inform your bank and find out about taxation in your new country of residence: your investment income will in principle be taxed there, and the German bank may apply other rules.
The 4 most common mistakes
- Never filling it in and letting the bank deduct 26.375% from the first euro.
- Exceeding the total of €1,000 by adding up several banks.
- Leaving the allowance at a bank that earns nothing while the gains are elsewhere.
- Forgetting to update it after a marriage, a separation or opening a new account.
Also read: Altersvorsorgedepot 2027: the complete guide
Educational article, not personalised tax advice. For a specific situation, consult a Steuerberater or a Lohnsteuerhilfeverein. Rules in force as of 31 October 2026.
Sources: Haufe – Basiszins 2026 · 2026 tax scale