What is final withholding tax?
Withholding tax is applied for all German tax resident clients. Tax residents outside Germany must declare their taxes themselves. Certain taxes such as those on dividends may still be withheld by the paying institution.
Various taxes are due on investment income which arises from interest, dividends and realised capital gains. In Germany, this is done via the final withholding tax. This is a withholding tax that the paying institution (e.g. asset manager, bank, fund manager or insurance company) pays directly to the tax office. The final withholding tax in Germany is currently 25 % plus a solidarity surcharge and, if applicable, church tax.
The final withholding tax on capital gains is not due if you have issued an exemption order to the respective institution and have not yet exhausted your personal allowance which is currently 1,000 euros per year. Exemption orders can also be adjusted during the year. As at: 2023)