Withholding tax in Germany in 2025: everything you need to know

At CapTrader, the tax is only paid with the tax return in the following year, which allows the tax amounts to be reinvested and can therefore improve the overall performance of your investments. The flat-rate withholding tax affects many investors in Germany and is crucial for their own wealth accumulation. In 2025, there are some changes and developments that are particularly relevant for you as an investor. 

In this detailed article, you will learn everything you need to know about withholding tax. We explain the basics, the calculation and show you how you can benefit from special tax planning models. 

What is the final withholding tax?

The final withholding tax is a flat-rate tax on investment income that has been levied in Germany since 2009. This tax was introduced to simplify and standardize the taxation of income from capital assets. 

It amounts to a flat rate of 25 % and is supplemented by the solidarity surcharge and, if applicable, church tax. 

The final withholding tax applies to various types of investment income, including interest, dividends and realized capital gains. It ensures that the tax liability is already fulfilled when the income is paid out, simplifying the process for investors. 

This means that banks and brokers automatically pay the tax to the tax office and the investor generally does not have to take any additional steps. 

Who is affected by the flat-rate withholding tax in Germany?

Both private investors and institutional investors are affected by the final withholding tax. This means that almost everyone who earns investment income in Germany must take this tax into account. Foreign investors are also subject to the provisions of double taxation agreements, which can reduce the tax burden under certain circumstances.

Double taxation agreements are tax agreements between two countries. For example, if you receive dividends from stock corporations in the USA, the withholding tax paid will be credited to the German tax office. This avoids double taxation to the detriment of the investor. 

Calculation of the final withholding tax

The final withholding tax is calculated on the basis of a fixed percentage rate of 25 % on the investment income. In addition, there is a solidarity surcharge of 5.5 % of the final withholding tax. Depending on your religious affiliation and your federal state, church tax may also be payable.

One important aspect you should consider is the saver's allowance. This allowance allows you to keep a certain amount of your investment income tax-free. The saver's allowance is 1,000 euros per year and per person. To be able to use this allowance, you must apply for it at your bank. Without this application, the final withholding tax is automatically levied on all your investment income.

Let's look at a specific example, taking into account the saver's allowance: You earn interest of EUR 2,000. After deducting the saver's allowance of EUR 1,000, EUR 1,000 remains taxable.

The final withholding tax on these 1,000 euros is 250 euros (25 % of 1,000 euros). The solidarity surcharge on this amounts to 13.75 euros (5.5 % of 250 euros). If you live in a federal state where the church tax is 9 %, this would be an additional 22.50 euros (9 % of 250 euros). You therefore pay a total of 286.25 euros in taxes and duties.

Offsetting losses on investments

A key aspect of the flat-rate withholding tax is the possibility of offsetting losses. Losses from investments can be offset against gains, which reduces your tax burden. For this purpose, there is a so-called loss offsetting pot in which losses can be collected and offset against future gains. Your bank or broker normally pays the withholding tax automatically.

Losses that you cannot fully offset in one year can be carried forward to the next year. This gives you the opportunity to offset future profits against losses. This regulation helps you to optimize your tax burden and ensure that you do not pay more tax than necessary. It is important to note that losses can only be offset within the same type of income, i.e. losses from share transactions can only be offset against gains from share transactions.

Another advantage of offsetting losses is that they are also taken into account in the annual tax return. The tax office keeps a loss certificate that confirms which losses could not be offset in one year and are carried forward to the next year. This certificate is particularly useful for keeping an accurate and transparent overview of your tax obligations.

Tax optimization and planning for withholding tax

The flat-rate withholding tax offers numerous opportunities for tax optimization that you can use to reduce your tax burden and maximize your return. Various strategies that can help you manage your investment income efficiently are explained in detail below.

One of the most effective strategies for optimizing withholding tax is to use tax-free forms of investment. Profits from tangible assets such as gold or silver are already exempt from withholding tax after a holding period of one year. Capital-forming benefits are particularly worth mentioning here. Here you benefit from considerable tax advantages, as the contributions are often paid in directly from your gross salary.

However, there are also disadvantages with this form of investment. The fees are often higher than when investing directly in securities, which can reduce performance. You are also tied to contracts that offer less flexibility. You must adhere to certain conditions and often only have limited options for disposing of your money. 

You can avoid all these disadvantages with a private securities account. You can adapt your investment strategy flexibly and do not have to adhere to any contractual conditions. You also avoid the high fees associated with many pension products and capital-forming benefits. This can significantly increase your net return.

Timing your investments can also bring considerable tax advantages. By cleverly deferring tax, you can delay the final withholding tax and reinvest the money saved, thereby generating additional income. An effective method of tax deferral is the targeted sale and immediate repurchase of securities shortly before the end of the year in order to utilize unused allowances. 

Let's assume that you have only used 300 euros of your saver's allowance of 1,000 euros and would like to claim the remaining 700 euros as a tax benefit. You could sell securities that have made a capital gain of around 700 euros. 

If you sell these shares before the turn of the year and buy them again immediately, the withholding tax will theoretically be deducted. However, you can keep the entire investment income due to the unused tax-free amount. The share will then stand at +/- 0 in your securities account and future profits will be treated more favorably for tax purposes.

Another approach to tax optimization is the targeted offsetting of losses. If you sell shares at a loss, you can offset these losses against future gains. This reduces your taxable income and therefore your tax burden. Make sure you make optimum use of your loss offsetting pots and adjust your investment strategy accordingly.

Losses from investments can be collected in loss offsetting pots and offset against future gains. There are two types of loss offsetting pots: those for general losses and those for losses from the sale of shares. General losses can be offset against all investment income, while losses from the sale of shares can only be offset against gains from the sale of shares.

Long-term tax planning is crucial to the successful implementation of your investment strategy. The final withholding tax has a significant impact on your investment decisions, so you should plan your investments in such a way that you can benefit from tax advantages in the long term. This is particularly important for retirement planning.

A key aspect of long-term tax planning is considering the tax burden over several years. Plan your investment strategy in such a way that you optimize your investment income over a longer period of time. You can achieve this by cleverly diversifying your forms of investment and making strategic use of tax allowances and loss set-off pots. By combining these different methods, you can minimize your tax burden and maximize your net return.

It may also make sense to consult a tax advisor or financial expert to support your tax optimization and long-term tax planning. An expert can help you understand the complex tax rules and develop a customized strategy that takes your individual financial goals into account.

Special tax advantages with CapTrader

CapTrader offers its customers a special approach to withholding tax that differs from the practice of most banks and brokers. While most institutions automatically pay the withholding tax directly after each trade, CapTrader offers the option of paying the tax yourself as part of the annual tax return.

A major advantage of this regulation is the tax deferral. The option of not paying the tax until the end of the year means that more capital remains in your custody account. This additional capital can be invested further and generate additional income. The advantage of tax deferral is that you can design and optimize your investment strategy more flexibly. You have more leeway to react to market movements and plan your investments strategically.

CapTrader therefore gives you better control over your tax burden and your investments. You can use your investment income more efficiently and plan your tax payments optimally. This flexibility can be a significant financial advantage, especially for active traders and investors who trade and invest regularly.

Practical calculation examples for withholding tax at CapTrader

To illustrate the advantages of this model, let's look at a concrete example. Let's assume you make a profit of 10,000 euros in 2025. With a traditional broker, 25 % withholding tax would be deducted immediately, i.e. 2,500 euros. Solidarity surcharge and church tax are added to this. To keep the example simple, these are left out. 

This leaves you with 7,500 euros for reinvestment. With CapTrader, on the other hand, the entire EUR 10,000 remains in your custody account until you submit your tax return. This additional capital can continue to work and generate additional income.

Let's assume that you can achieve an additional return of 10 % per year with the 2,500 euros that are not immediately deducted as tax at CapTrader. This means that at the end of the first year you will have made an additional profit of 250 euros (10 % of 2,500 euros). 

This profit is then reinvested the following year so that you can also achieve a return on the new 250 euros. This so-called compound interest effect can be considerable over the years and significantly improve your overall performance.

Conclusion: Now you can plan the flat-rate withholding tax cleverly

The final withholding tax is an important aspect for investors in Germany. It affects your investment income and can influence your return. You now have a comprehensive understanding of what the flat-rate withholding tax is and how it works. You know when you are affected by this tax and how it is calculated. 

You will also have learned how you can benefit from loss offsetting and how special regulations, such as those from CapTrader, can offer you tax advantages. With the practical tips on optimizing withholding tax and long-term investment strategies, you are well equipped to manage your investment income efficiently and minimize your tax burden.