ETF Tax Guide 2026 — Vorabpauschale, KESt & Partial Exemption
In 2026 the German Vorabpauschale (pre-payment lump-sum tax) bites harder than in prior years. Here is the complete tax guide for ETF investors in Germany and Austria — with worked examples, partial-exemption rules and three actionable strategies.
How are ETFs taxed in 2026?
ETF taxation differs significantly between Germany and Austria. Both countries levy roughly 27.5 % on realised gains — but the mechanics differ, especially for accumulating ETFs.
🇩🇪 Vorabpauschale 2026 — what changes
The Vorabpauschale is a notional annual "minimum tax" on accumulating and partly-accumulating funds in Germany. It was introduced with the 2018 Investment Tax Act (InvStG) to prevent investors from indefinitely deferring taxes through endless reinvestment.
Calculation formula
Cap = ETF's actual annual gain
Tax = Vorabpauschale × 70 % (equity ETF) × 26.375 %
Important: The Vorabpauschale only applies if the ETF actually rose during the year. Loss years = €0. It is automatically debited from the cash account in January of the following year.
€10,000 MSCI World ETF (accumulating)
→ With the saver's allowance (€1,000) still unused: €0. Only above €1,000 of total capital income do you actually pay.
The base rate has risen significantly compared to the ECB low-rate years 2018–2022 (often below 1 %). On a €100,000 portfolio of accumulating equity ETFs, the 2026 Vorabpauschale is around €1,770, of which 70 % is taxable (~€1,239) → effective tax ≈ €327. Investors already receiving meaningful dividends will easily blow through the saver's allowance.
🇩🇪 Partial Exemption — Germany's biggest ETF tax break
The Teilfreistellung (partial exemption) is Germany's best ETF tax gift: a portion of returns is fully tax-free, depending on the fund's equity allocation.
| Fund type | Equity share | Partial exemption | Examples |
|---|---|---|---|
| Equity fund | ≥ 51 % | 30 % | MSCI World, S&P 500, EM |
| Mixed fund | ≥ 25 % | 15 % | Multi-asset ETFs, Vanguard LifeStrategy |
| Real-estate fund | domestic | 60 % | Open DE real-estate funds |
| Real-estate fund | foreign | 80 % | International REIT funds |
| Bond ETFs | 0 % | 0 % | No partial exemption |
Accumulating vs. distributing — which is better tax-wise?
Pros: Automatic reinvestment with no transaction fees, full compounding, no re-orders needed.
Cons: Vorabpauschale debits the cash account every year (DE); in AT, deemed distributed income must be self-reported on E1kv.
Pros: The saver's allowance (€1,000 DE) is fully exploited via real distributions, no Vorabpauschale surprise in January.
Cons: Reinvesting under €25 per buy is fiddly and sometimes costs fees, slight compounding loss.
For savers under €1,000 capital income/year, distributing ETFs are slightly ahead — you fully use the saver's allowance. For aggressive wealth builders (>€1,000/year), accumulating ETFs win long-term thanks to full compounding, despite the Vorabpauschale. In Austria it's a wash — same tax, full KESt deduction either way.
🇦🇹 ETF taxation in Austria
In Austria a flat 27.5 % KESt applies to all ETF returns — dividends, distributions and realised gains. No Vorabpauschale, but also no partial exemption.
Deemed distributed income (AGE)
For accumulating funds, Austria taxes the "deemed distributed income" annually — dividends the fund collected but did not pay out. The OeKB publishes these values for every approved fund.
Domestic brokers (easybank, Erste Bank, DADAT, BAWAG) deduct the tax on AGE automatically. With Trade Republic, IBKR, eToro you must transfer the AGE values from the tax report to E1kv yourself (code 947).
DE vs. AT — direct comparison
| Aspect | 🇩🇪 Germany | 🇦🇹 Austria |
|---|---|---|
| Nominal tax rate | 25 % + Soli (5.5 %) + church tax | 27.5 % flat |
| Effective rate equity ETF | ≈ 18.46 % | 27.5 % |
| Tax-free allowance | €1,000 saver's allow. | €0 |
| Vorabpauschale on accum. | ⚠️ yes (annually) | ❌ no |
| Deemed distributed income | via Vorabpauschale | ⚠️ yes, annually |
| Equity-ETF partial exemption | 30 % | 0 % |
| Loss carry-forward | ✓ unlimited | ❌ not possible |
3 tax strategies for ETF investors in 2026
€1,000 per person × 2 (married couple) = €2,000/year of tax-free returns. Set an exemption order ("Freistellungsauftrag") at every broker! With €4,000 of gross dividends in a distributing MSCI World, after partial exemption (30 %) and the allowance, almost €0 of tax remains.
In Austria losses can only be offset within the same year — if you have ETF gains in November, deliberately sell losing crypto or stock positions to reduce tax. In Germany with unlimited carry-forward, often useful when an unused stock-loss bucket can offset future gains.
In early January 2027 the 2026 Vorabpauschale will be debited from the cash account. Trade Republic may force-sell ETF units if cash isn't there. From December 2026 onwards, hold roughly 0.3–0.4 % of your ETF value as a liquidity buffer.
FAQ — ETF Tax 2026
How big is the 2026 Vorabpauschale in concrete terms?
The 2026 base rate is 2.53 % (Bundesbank effective date 02 Jan 2026). On a €10,000 ETF position the Vorabpauschale is €177.10, of which 70 % is taxable (~€124), tax at 26.375 % ≈ €32.70. Scales linearly with portfolio value.
Do I pay Vorabpauschale even when the ETF fell?
No. The Vorabpauschale is capped at the actual annual gain. Loss = €0. Example: ETF starts at €10,000, ends at €9,500 → €0 Vorabpauschale.
Do I get the Vorabpauschale back when I sell?
Yes, indirectly. Already-taxed Vorabpauschale is deducted from the tax base on a later sale — double taxation is avoided. Trade Republic, Scalable, Flatex & co. track this automatically.
What about ETFs in a Riester/Rürup pension?
Inside tax-favoured wrappers (Riester, Rürup, BAV) the Vorabpauschale is fully waived. Even insurance wrappers (unit-linked life policies, ETF policies) qualify for the 12-year/age-62 bonus with only half the tax rate on returns.
Are US-domiciled ETFs (e.g. VOO, VTI) suitable for EU investors?
Since MiFID II, US ETFs may no longer be actively sold to EU retail investors. Existing holdings are fine; no new buys. EU investors should pick Irish-domiciled UCITS ETFs (e.g. VWCE, IWDA, SXR8) — 15 % US withholding is automatically credited at the fund level.
What happens when moving from DE to AT (or vice versa)?
Leaving Germany may trigger an exit tax on hidden reserves (mainly for shareholdings ≥ 1 %, rarely for ETFs). On arrival in Austria, original cost bases continue. Critical: consult a tax adviser!