(2023) Church tax on capital gains: Regulation since 2015

On capital gains, banks deduct the withholding tax of 25% as well as the solidarity surcharge of 5.5% on the withholding tax. In addition, church members must also pay church tax. Until 2014, they had the option of having the church tax deducted at source like the withholding tax or having it assessed as part of the tax return. That's the theory. In practice, many investors do not exercise this option, with the result that no church tax is paid on the capital gains.

Since 2015, banks have automatically deducted church tax from capital gains and paid it to the tax office along with the withholding tax and the solidarity surcharge. To do this, they enquire once a year between 1 September and 31 October at the Federal Central Tax Office whether the customer was subject to church tax on the cut-off date of 31 August of the relevant year. In certain cases, enquiries outside this period are also possible, e.g. when a life insurance policy is paid out. The new regulation applies to capital gains received from 1 January 2015.

If you do not want the bank to know your affiliation to the Protestant or Catholic Church, you can object to the data query at the Federal Central Tax Office (so-called blocking notice). In this case, you do not participate in the automated procedure, so the bank does not deduct church tax on capital gains. You must lodge the objection by 30 June of the year if the blocking notice is to be taken into account for the regular query on 31 August of the year.

However, you must then submit the "Form KAP" to determine the church tax as part of the tax return. You should be aware that the Federal Central Tax Office forwards the blocking notice to your tax office, so it is easy for them to check whether the "Form KAP" is included with the tax return or whether you have submitted a tax return at all.