How the Calculations Work

Overview

German tax residents who hold investment funds (ETFs, mutual funds) through foreign brokers are responsible for reporting their investment income to the German tax authorities. Unlike German brokers, foreign brokers do not automatically withhold taxes or provide German tax documents.

This tool helps you work out the values you may need for your annual tax return, especially for the ELSTER forms Anlage KAP-INV (investment funds) and Anlage KAP (other capital income).

The sections below explain the main ideas behind the calculations.

Vorabpauschale (Advance Lump Sum)

What it is

The Vorabpauschale is a yearly taxable amount for investment funds. It means that Germany can tax part of the fund return each year, even if the fund does not pay out cash.

The amount for one year is treated as received on January 2 of the next year. So the Vorabpauschale for 2024 belongs to tax year 2025.

The formula

The calculation follows these steps:

In simple terms, the formula compares a standard base return with the fund's actual return for the year. The lower value is used, then distributions are subtracted. The result cannot go below zero.

Basiszins (Base Interest Rate)

The Basiszins is published annually by the German Federal Ministry of Finance (Bundesfinanzministerium). It is derived from long-term government bond yields. When the Basiszins is zero or negative, no Vorabpauschale is charged for that year.

Pro-rata for mid-year purchases

According to § 18 Abs. 2 InvStG, if fund shares are acquired during the year, the Vorabpauschale is reduced proportionally. The reduction is 1/12 for each full month before the purchase month.

Examples: January purchase = 12/12 (full year), June purchase = 7/12, December purchase = 1/12.

Multiple purchases and savings plans

If you bought the fund several times during the year, each purchase technically has its own pro-rata calculation.

The precise calculation would require the fund's January 1 NAV and your exact share amounts. This tool uses a practical approximation and works with the invested amounts instead.

Teilfreistellung (Partial Exemption)

To avoid double taxation (funds already pay taxes at the fund level), a portion of the income from investment funds is tax-exempt. The exemption rate depends on the fund type:

A fund qualifies as an equity fund (Aktienfonds) if it continuously holds at least 51% equities. Mixed funds (Mischfonds) require at least 25% equities. The fund's documentation (KIID/KID) typically states the applicable Teilfreistellung rate.

Capital Gains Tax Rate

Germany applies a flat tax (Abgeltungsteuer) on capital income:

Church tax (Kirchensteuer) may apply additionally (8-9% of the capital gains tax, depending on the state). This tool does not include church tax in its calculations.

Selling Fund Shares

Basic calculation

When selling fund shares, the taxable gain is:

Sale adjustment (KAP-INV line 53)

On sale, the key adjustment is the eligible KAP-INV line 53 amount for the shares sold. It is based on prior Vorabpauschalen, but it is not automatically the full fund-level history.

In practice, that amount must match the shares sold now and exclude any part already used on earlier partial sales. If you bought at different times, FIFO allocation matters, and this app does not calculate that exactly.

Where the Numbers Go in ELSTER

Funds in ELSTER (Anlage KAP-INV)

This form is for reporting income from investment funds. Distributions and the Vorabpauschale are reported in different lines depending on the fund type:

Enter the Vorabpauschale before any partial tax exemption. The tax office applies that exemption later.

The app shows the main KAP-INV lines and lets you enter the sale offset manually in the sale wizard. It does not generate the detailed KAP-INV worksheet lines 46-56 automatically.

Other capital income in ELSTER (Anlage KAP)

This form is for your other capital income, such as interest, dividends, stock sales, bond sales, and derivatives from foreign sources:

Current Limits

The tool is useful for common cases, but the following limits still apply:

• Mid-year purchase approximation: For purchases made during the year, the invested amount is used as an approximation rather than the exact January 1 NAV multiplied by shares.
• Fund holding model is still simplified: The current app does not model top-up purchases into an already-existing holding during the same year, exact FIFO lots, or same-year ETF/fund buy-and-sell round-trips.
• Pre-2018 fund sales are outside the current scope: Old-share rules (Alt-Anteile / pre-2018 acquisition cases) are not modeled yet.
• Line 25 / default-loss cases are unsupported: Non-collectability, write-offs, and worthless-asset loss events are not modeled as ordinary bond or fund sales.
• Worthless investment-unit failures are unsupported: The current sale wizard is for ordinary post-2018 mainstream fund sales, not for worthless-unit or other total-failure events that ELSTER routes outside the ordinary KAP-INV sale lines.
• Tax-free capital repayments are not modeled separately: If they occurred, they reduce acquisition cost and must be reflected manually in the cost basis.
• Church tax not included: The calculations do not include Kirchensteuer, which varies by state and religious affiliation.
• Sparer-Pauschbetrag only partly modeled: The app supports a manual filing-context input for KAP line 17, but it does not calculate your remaining allowance or model the full filing context.
• Foreign-tax scope is still limited: The app can now separate explicit non-fund inputs into ELSTER lines 40, 41, and 42, but it does not decide for you which treatment is legally correct. Fund-distribution foreign tax is currently modeled only for line 41.
• Loss offsetting: The tool does not handle loss carryforwards or offsetting between different types of capital income.
• Currency conversion: All values should be entered in EUR. Currency conversion from foreign currencies must be done separately using appropriate exchange rates.

Summary

German investment taxation mainly comes down to yearly fund taxation (Vorabpauschale) and tax on sales. The key formulas are:

• Vorabpauschale = min(Jan 1 value × Basiszins × 0.7, Mehrbetrag) − distributions, where Mehrbetrag = price change + distributions
• Pro-rata reduction for mid-year purchases: (13 − month) / 12
• Teilfreistellung reduces taxable amounts by 15-80% depending on fund type
• Tax rate: 26.375% (25% + solidarity surcharge)
• For sales, the relevant adjustment is the eligible KAP-INV line-53 amount for the shares sold

The resulting values can be used as a guide when filling out Anlage KAP-INV and Anlage KAP in ELSTER.