If you’ve saved money and been lucky enough to collect interest on it, you should be careful not to pay too much tax. Year after year, as a saver, you have an allowance on your profits. And the best way to claim this is by submitting an exemption order.
TABLE OF CONTENTS
1-Exemption order: Use up to 2,000 euros tax-free annually
2-How do I get an exemption order?
3-What happens if I exceed the allowances?
4-Can I waive an exemption order?
If you regularly receive interest on your call money or fixed deposit or maybe even use interest on your checking account or savings account, you may have heard of an “exemption order” (FST). This is important if you are subject to tax in Germany, i.e. if you have to pay taxes on your capital gains in this country. You can be exempt from this tax burden up to a certain amount. And it is precisely at this point that the exemption order appears for savers.
EXEMPTION ORDER: USE UP TO 2,000 EUROS TAX-FREE ANNUALLY
Capital gains taxes can be incurred in a number of ways. For example, interest must be taxed, but so must profit-sharing (dividends) that you receive for holding certain shares. Likewise, you have to pay tax on profits that you make from the sale of shares.
However, the German state grants you a so-called savings allowance. Up to a sum of 1,000 euros per year, as a single person, you have not had to pay any taxes on your capital gains since 2023. Previously it was only 801 euros. Married couples can have the free ticket for their investment income fixed at 2,000 euros. Before 2023 it was only 1,602 euros.
Anyone who collects more than EUR 1,000 or EUR 2,000 in investment income in a calendar year will be asked to pay by the state. Then the final withholding tax of 25 percent applies. If you have an account or securities account with a German financial institution, this taxation will automatically be paid to the responsible tax office.
There is also a solidarity surcharge (5.5 percent) and, if necessary, church tax (8 or 9 percent depending on the federal state). If you own foreign stocks or ETFs with foreign securities, you must also expect withholding tax, which can currently be up to 35 percent. The amount of withholding tax depends on where the corporation in which you invest is based.
HOW DO I GET AN EXEMPTION ORDER?
In order to be able to use an exemption order, it is best to contact your bank directly. She can tell you where you can find the right form to download and then submit. If you use online banking, the FST can usually also be found in the service area of your banking portal and can usually be processed directly via the Internet and submitted to your bank.
If necessary, you can also split your exemption order. This can make sense if, for example, you use a lucrative overnight money account at one bank and also use a stock account at another bank. Then you have the option, for example, of depositing half of your savings allowance with Bank A and the second half with Bank B. However, it is up to you how much you split up your exemption orders. It can also be 100 euros at one bank and 900 euros at the other.
WHAT HAPPENS IF I EXCEED THE ALLOWANCES?
It is possible to change the deposited allowances at any time. It is only important that you do not exceed the applicable allowance limits. Submitting an exemption order for EUR 1,000 or 2,000 to several banks is therefore not permitted. If you do, there could be problems with the tax office responsible for you. It checks the exemption orders you have given and initiates a detailed check if you provide incorrect information. You may even be sentenced to a fine because you have violated tax law. You should definitely avoid this.
Incidentally, you can submit your exemption application to your bank or savings bank for a period of your choice or for an unlimited period. If you opt for the unlimited term, this has the advantage that you do not have to submit a new FST every year. Rather, it is automatically extended. However, you should note that there are also deadlines at your bank for filing an exemption order that you should meet. With some banks, an exemption order also expires after a year or on December 31, so that you then have to start working again.
CAN I WAIVE AN EXEMPTION ORDER?
By the way, if you decide not to apply for an exemption order for your capital gains, that’s no big deal. Because if you state the withholding tax automatically withheld by the bank in your annual tax return, you will get it back later in your tax assessment up to the exemption amount that applies to you. With an exemption order, you can save yourself additional work as part of your tax return. That’s why it’s so important that you file an FST with your bank.
By the way: A saver’s allowance of currently EUR 1,000 per calendar year also applies to a children’s savings account. Higher investment income, which is possible with an ETF savings plan, for example, must also be taxed independently of a parental account. Under certain circumstances, a non-assessment certificate available from the tax office can be worthwhile for children, students or pensioners. Under certain conditions, no final withholding tax has to be paid on income that is higher than the fixed savings allowance. However, the income must not exceed certain limits.
