ETF Partial Exemption 30% — How It Works and Which ETFs Benefit (2026)
The German Teilfreistellung is the single most important tax break for ETF investors since the 2018 Investment Tax Reform. It means: a portion of fund income stays completely tax-free. The percentage depends on what the fund predominantly holds: 30% for equity ETFs, 15% for mixed funds, 60–80% for real-estate funds. This guide explains the rules, shows the impact in €-amounts, and lists concrete ETFs in each category. Applies to investors with German tax residency.
Equity-ETF example: 1,000 € gross income × (1 − 0.30) = 700 € taxable. On those 700 €, German capital-gains tax of 26.375% (incl. solidarity surcharge) applies = 184.63 € tax. Without partial exemption it would be 263.75 €. Savings: about 30%.
The Four Partial-Exemption Categories
| ETF Type | Requirement | Partial Exemption | Effective Rate |
|---|---|---|---|
| Equity ETF | ≥ 51% equity allocation | 30% | ~18.5% |
| Mixed ETF | ≥ 25% but < 51% equity | 15% | ~22.4% |
| Real-Estate ETF | ≥ 51% real estate (mostly domestic) | 60% | ~10.6% |
| Foreign Real-Estate ETF | ≥ 51% foreign real estate | 80% | ~5.3% |
| Bond / Fixed-Income ETF | < 25% equity, no real estate | 0% | 26.375% |
Effective rate = (1 − partial exemption) × 26.375% German capital gains tax + solidarity surcharge, excluding church tax and tax-free allowance offset.
Equity ETFs — 30% Tax-Free
By far the most relevant category for 95% of retail investors. Requirement: the ETF must continuously hold ≥ 51% equity. For an MSCI World or S&P 500, the allocation is permanently above 99%, so there is no risk of falling below the 51% threshold.
On 5,000 € gross gain per year (e.g. realized capital gain on sale), an equity-ETF holder pays roughly 923 € tax — a bond-ETF holder would pay 1,319 €. Difference: 396 € per 5,000 € gain.
Mixed ETFs — 15% Tax-Free
Mixed funds must continuously hold at least 25% equity — the equity allocation must be locked in the fund prospectus to qualify. Pure 50/50 stock-bond ETFs typically fall here, as do “LifeStrategy”-style products with 40–60% equity allocation.
Heads up: Vanguard LifeStrategy 80% Equity at 80% stocks counts as an equity ETF and gets the full 30% partial exemption. LifeStrategy 20% Equity falls below the 25% threshold and is not a mixed ETF either — zero partial exemption.
Real-Estate ETFs — 60% or 80% Tax-Free
Here it gets interesting: pure real-estate funds (≥ 51% real estate) get 60% partial exemption — if the fund predominantly invests abroad (≥ 51% foreign real estate), the rate jumps to 80%. Practical caveat: true “real-estate ETFs” in the InvStG sense are rare — most REIT-ETFs on the market hold shares of real-estate companies and therefore count as equity ETFs (30%).
Important: The German tax authority typically classifies these REIT-ETFs as equity ETFs (30%) — they hold shares of real-estate companies, not real estate directly. True 60/80% rates apply mainly to open-ended real-estate funds (not exchange-traded) such as hausInvest or UniImmo Deutschland.
Who Benefits How Much? Concrete €-Examples
Assumption: 10,000 € gross income per year (realized gains + distributions), tax-free allowance already used.
Difference equity ETF vs. bond ETF: ~792 € per year tax savings on 10,000 € gross gain — over 20 years and with compounding at 7% reinvested return, this becomes a final advantage of over 32,000 €.
Things to Watch Out For
- Partial exemption is applied automatically by your broker — no application needed.
- It works on distributions, on realized capital gains, and on the annual advance lump-sum tax (Vorabpauschale).
- The classification appears in the fund prospectus or the investment terms.
- If you use a foreign broker, you must claim partial exemption yourself in the German Anlage KAP (lines 27 ff.).
- If equity allocation drops below 51% (e.g. after a market crash), the fund can be downgraded from equity to mixed — rare but possible.
- REIT-ETFs are usually classified as equity ETFs, not real-estate ETFs.
- Closed-end funds and private equity are not investment funds under the InvStG — no partial exemption.
- Fund manager changes or mergers can retroactively change the classification — check the new status during reorganizations.
Related Topics
- Vorabpauschale 2026 — Complete Guide — how partial exemption also reduces the annual advance-lump-sum tax.
- Distributing vs Accumulating ETFs — which type wins in which life phase.
- German Tax Hub — All Topics — every tax topic for German residents at a glance.
- Tax Optimization Calculator — plug in your own numbers.
FAQ
Do ETFs get partial exemption automatically?
Yes, as long as they qualify as “investment funds” under the German InvStG — which applies to virtually all UCITS-ETFs sold in Germany. The broker recognizes the classification by ISIN and applies partial exemption automatically. You don’t need to do anything.
What about crypto ETFs / ETPs?
Crypto-ETPs are not investment funds — they are debt securities (ETN). They are subject to full capital-gains tax with no partial exemption — regardless of whether they track Bitcoin, Ethereum, or a basket. Holding period over 1 year does not make them tax-free like direct crypto purchases.
Can the partial-exemption rates change?
Theoretically yes — the rates are codified in InvStG § 20. Any change would require legislation with long lead time. As of 2026, the 30/15/60/80 rates have been stable since 2018, and no reform is announced for the current legislative period.
Does partial exemption also apply to losses?
Yes, in parallel: with an equity ETF, only 70% of a loss enters the loss-offset bucket — 30% of the loss is “lost” for tax purposes. Practical consequence: losses in equity ETFs are worth less than losses in bond ETFs (where 100% are offsettable).
What happens if a fund gets reclassified?
A reclassification (e.g. from equity to mixed due to strategy change) counts as a sale and repurchase — you must immediately tax the previous unrealized gains. This is rare in practice and usually avoided by fund houses because it spooks investors.
Does a Bitcoin-strategy ETF (e.g. holding MicroStrategy) get partial exemption?
Yes — if the ETF holds shares of MicroStrategy or similar Bitcoin-treasury companies, it qualifies as an equity ETF with 30% partial exemption. The underlying Bitcoin exposure is tax-irrelevant — what matters is that the fund directly holds equity shares.
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