ETF Taxation Germany 2026 — Partial Exemption & Vorabpauschale
Germany's ETF tax regime is complex but cheap: 30 % partial exemption on equity ETFs lowers effective tax to ~18.46 % — below Austria's 27.5 %. Here's the short guide with Vorabpauschale crash course.
How ETFs are taxed in Germany
Since the 2018 Investment Tax Reform Act, ETFs in Germany are taxed in three components:
- Distributions (distributing ETFs) → taxed immediately
- Vorabpauschale (accumulating ETFs) → annual lump-sum tax
- Disposal gains on sale → 26.375 % on price gain (less Vorabpauschale already paid)
All three components benefit from the partial exemption — Germany's most important tax boost.
Partial exemption — the core rule
| Fund Type | Equity Share | Exemption | Effective | Examples |
|---|---|---|---|---|
| Equity fund | ≥51 % | 30 % | 18.46 % | MSCI World, S&P 500, EM |
| Mixed fund | ≥25 % | 15 % | 22.42 % | Vanguard LifeStrategy 60 |
| DE real estate fund | Domestic | 60 % | 10.55 % | DE open-ended real estate |
| Foreign real estate | Foreign | 80 % | 5.28 % | International REITs |
| Bond ETF | 0 % | 0 % | 26.375 % | EUR govt bond ETFs |
30 % of earnings are completely tax-free. €1,000 equity ETF dividend → only €700 taxed at 26.375 % = €184.62 tax. Effective rate on gross €1,000 = 18.46 %.
Vorabpauschale at a glance
The Vorabpauschale is a fictional minimum annual tax on accumulating ETFs. Calculated from fund value × base rate (2.53 % in 2026) × 70 %, less partial exemption. Plain English: €10,000 MSCI World yields ~€33 tax in 2026.
Accumulating vs. distributing — taxwise?
Pros: Full compounding, no re-orders, automatic saving.
Cons: Vorabpauschale debits cash account annually.
Pros: Real distributions consume the €1,000 savings allowance.
Cons: Re-investing takes time, slight compounding drag.
Savers under €1,000 capital income/year: distributing ETFs slight edge (use allowance fully). Aggressive wealth builders: accumulating ETFs slightly better long-term via full compounding.
FAQ — ETF Taxation Germany
Which ETFs qualify as "equity funds" for partial exemption?
Funds with ≥51 % equity per fund prospectus. MSCI World, S&P 500, FTSE All-World, Nasdaq-100 — all qualify. Multi-asset funds (e.g. Vanguard LifeStrategy 60 % Equity) don't reach the 30 % full equity exemption — only 15 % mixed-fund exemption.
Do I need a separate Annex KAP for each ETF?
No — at German broker with source withholding everything is automatic. Tax certificate arrives in February. Annex KAP needed only for: foreign brokers, splits across brokers, intentional loss carryforward.
What if the fund switches from distributing to accumulating?
When the ETF provider itself changes the variant: usually no taxable event from investor view — ISIN stays, cost basis stays. If you yourself sell and buy a different ISIN, that realizes a taxable disposal gain.
Are US-domiciled ETFs disadvantageous?
Yes, multiple reasons: they can't be bought at most EU brokers (PRIIPS), and fund-level WHT would be higher (US ETF pays 30 % on its US dividend). Always use Ireland or Luxembourg-domiciled UCITS ETFs.
What about crypto ETPs (BTC ETN, ETH ETN)?
Crypto ETPs are not investment funds under InvStG, but debt securities. Disposal gains taxed at full capital gains rate (26.375 % no partial exemption). Direct crypto holdings (Coinbase, Kraken): 1-year speculation period — tax-free thereafter. Crypto ETPs are not direct coins — no holding period exemption.