Withholding tax (Abgeltungsteuer)

German withholding tax (Abgeltungsteuer) is levied on private income from capital. Such income includes dividends, interests, income from investment funds and certificates, nearly all earnings from capital assets, private capital gains from sale of stocks and covered options and other payments from securities and derivatives. See § 20(1) EStG. 

Pursuant to § 43 a Para. 1 EStG the withholding tax rate is 25% plus solidarity surcharge of 5.5% on the final withholding tax and church tax (if applicable). This makes a total of tax rate of 26.375% (without church tax).  Capital gains arising from the sale of privately held shares bought before 31 December 2008 are generally not taxed. 

Withholing tax on income derived from capital held with a German financial institutions is withheld by such institutions and transferred to the German tax authorities and there is no requirement to list it in the German income tax return. Income derivied from capital held with a foreign financial institutions must be listed in the German income tax return and will be taxed at the withholding tax rate. 

The tax withheld is final unless the taxpayer lists the income in his German income tax return and the individual income tax rate is lower than 25  %.