ETF tax from 2024: What is the advance flat rate and how is it calculated?

ETF tax from 2024: What is the advance flat rate and how is it calculated?

According to a report by www.br.de, ETF investors in Germany must prepare for tax changes from 2024. The so-called advance flat rate, which serves as the assessment basis for the capital gains tax on ETFs, is then expected to have significant effects.

The advance flat rate was introduced in 2018 in order to respond to tax profits from ETFs in the portfolio, even if they have not yet been realized. An example calculation shows that investors may have to pay the advance flat rate from 2024 onwards. Assuming an increase in value from 10,000 euros to 10,700 euros and a profit distribution of 100 euros, the advance flat rate is calculated at 78.50 euros for a pure stock ETF, whereby the tax rate of 26.38 percent is applied.

The introduction of the advance flat rate also has an impact on taxation when selling ETFs. Profits from the sale are subject to a 25 percent withholding tax and possibly an additional solidarity surcharge.

It is important for investors to check their exemption orders and possibly distribute them across several banks in order to make optimal use of the saver's exemption amount. In addition, investors must declare the advance flat rate in the income tax return, although German banks usually carry out the calculation automatically and provide instructions for entering the tax in the tax return.

Overall, ETF investors will have to prepare for an increased tax burden from 2024, which may also have an impact on investment decisions and behavior.