Vorabpauschale vs. Realized Gain: When Do You Pay Which Tax?
One of the most common questions about German ETF taxation: if I pay the Vorabpauschale every year and then capital gains tax on the realized gain at the time of sale — am I being double-taxed? The clear answer: no. The Vorabpauschale is credited at the time of sale. But the interplay isn’t trivial. This guide walks through the mechanics with a concrete worked example, explaining how the offsetting works step by step and which practical pitfalls you need to know.
The offsetting runs automatically through the broker. The Finanzamt does not get money twice — instead, the Vorabpauschale is a pre-payment of the capital gains tax that would otherwise be due at sale.
The lifecycle of an ETF position — taxwise
Imagine you buy an MSCI World ETF on January 15, 2024 for €50,000 and sell it on March 10, 2030 for €80,000 — capital gain €30,000. During those 6 holding years, two tax events occur in parallel:
- Annual Vorabpauschale — small advance tax based on value × basiszins × 0.7 (see complete guide).
- Realized gain at sale — full capital gains tax on the gain, less the previously paid Vorabpauschale amounts.
The two mechanisms interlock seamlessly. The trick is the offsetting at sale — which prevents double-paying.
Concrete example over 6 years
Assumptions: Equity ETF (30 % partial exemption), average basiszins of 2.4 %, continuous price appreciation. 2024 purchase at €50,000, +10 % annual growth, 2030 sale at €80,000.
| Year | Value Jan 1 | Vorabpauschale (taxable) | Tax paid |
|---|---|---|---|
| 2024 | — | — | — |
| 2025 | €50,000 | €588 | €155 |
| 2026 | €55,000 | €647 | €171 |
| 2027 | €60,500 | €712 | €188 |
| 2028 | €66,550 | €783 | €207 |
| 2029 | €73,205 | €861 | €227 |
| Total VP | €3,591 | €948 |
At sale in 2030 for €80,000:
Total tax over 7 years: €948 (Vorabpauschale) + €4,592 (sale) = €5,540. Without the Vorabpauschale mechanism, the tax at sale would be €21,000 × 26.375 % = €5,539. Difference: a single euro from rounding. No double taxation.
How does the offsetting work mechanically?
Your broker maintains a separate tax-cost-basis ledger for each ETF. Every Vorabpauschale paid is recorded there as a pre-payment of tax — linked to the acquisition date of the corresponding ETF units.
At sale, the offsetting follows this sequence:
- FIFO principle: Oldest units sold first (First In, First Out).
- For each sold unit, the share of accumulated Vorabpauschale is determined.
- The total offsetting amount is deducted from the realized gain.
- Capital gains tax applies only to the remainder.
The broker shows this offsetting in the tax certificate as „Anrechenbare Vorabpauschale aus Vorjahren” (creditable Vorabpauschale from prior years) — the entry is fully traceable.
Three pitfalls you need to know
- Archive tax certificates — you don’t need them for offsetting at the same broker, but you do for portfolio transfers.
- Explicitly request the transferring broker to forward the cumulative Vorabpauschale data — otherwise the offsetting is lost.
- Apply for a loss-offset certificate when transferring the portfolio to another broker.
- Pitfall 1 — portfolio transfer without KAP info: If the new broker doesn’t receive the cumulative VP, the full sale is taxed — de facto double taxation.
- Pitfall 2 — foreign brokers: Interactive Brokers, DEGIRO & Co. don’t maintain a German Vorabpauschale ledger. You must declare it yourself via Annex KAP and offset manually at sale.
- Pitfall 3 — gifted ETF / inheritance: The cumulative VP of the donor/decedent passes to the heir for offsetting — but the heir must actively have it documented at the broker.
Special case: sale in a loss year
If the ETF is sold at a loss (sale price < cost basis), a tax loss arises. Even then, the previously paid Vorabpauschale amounts are credited — they don’t reduce the loss further but increase the offsettable loss amount in the loss-carry-forward bucket.
Practical example: you’ve paid €3,000 in Vorabpauschale, ETF at €5,000 loss at sale. Your loss-offset bucket is increased by €5,000 + €3,000 × ETF ratio ≈ €7,100 — you can offset this against future stock/ETF gains.
Related topics
- Vorabpauschale 2026 — Complete Guide — mechanics, formula, examples.
- Legally Avoid the Vorabpauschale — 5 strategies to minimize.
- Basiszins 2026: 2.29 % — what the annual update means for your ETFs.
Frequently Asked Questions
Am I being double-taxed by the Vorabpauschale?
No. The Vorabpauschale is a pre-payment of the capital gains tax that would otherwise be due at sale. At sale, the previously paid Vorabpauschale is deducted from the realized gain — you pay the same total tax over the holding period.
What if I never sell the ETF (buy and hold forever)?
Then you pay the small annual Vorabpauschale but never the big sale settlement. The loss-carry-forward balance is preserved. On inheritance, the cumulative VP passes to the heirs — reducing their later sale tax accordingly.
How do I see how much VP has already been credited?
In your broker’s annual tax certificate — the entry is called „Anrechenbare Vorabpauschale aus Vorjahren”. At Trade Republic: Profile → Taxes → Tax Certificate. At comdirect, ING, DKB, Scalable: under Taxes/Certificates respectively.
Does the offsetting get lost when I transfer the portfolio?
It gets lost if the transferring broker doesn’t pass the cumulative VP to the new broker. The form for this is called „Übertrag mit Anschaffungs- und Steuerinformationen” — request it explicitly from the old broker before each transfer.
Are foreign brokers (IB, DEGIRO) tax-equivalent?
No. Foreign brokers don’t maintain a German tax-cost-basis ledger. You must declare the Vorabpauschale yourself via Annex KAP and offset manually at sale — more effort, same tax rate.
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