When is it necessary to complete the KAP form?

Since the introduction of the withholding tax in 2009, the KAP form (income from capital assets) is generally no longer mandatory. The withholding tax is deducted directly by the banks and paid to the tax office. However, in certain cases, you must or can still submit the KAP form – especially if you wish to claim tax advantages or have received certain income without tax deduction.

Submission is mandatory if:

• Capital gains were not subject to domestic tax deduction, e.g.:
  • Income from foreign capital investments (e.g. interest, dividends, funds)
  • Interest from private loans
  • Income from foreign accumulating funds
  • Interest on tax refunds
  • Sale of endowment life insurance policies (if taken out after 2005)
  • Gains from the sale of GmbH shares with less than 1% participation

Voluntary assessment („optional assessment“) is advisable if:

• a loss carryforward is to be used
• a loss offset with capital gains is intended
• the saver’s allowance has not been fully utilised
• church tax was not correctly deducted
• foreign withholding tax is to be credited
• you wish to apply for a favourable tax rate (individual tax rate lower than 25%)

Additional forms:

• KAP-INV form: For certain investment funds without tax deduction
• KAP-BET form: For capital gains from participations with separate determination

Losses from worthless shares: Tax treatment

Background

If shares become worthless – for example, due to insolvency – losses are incurred that can be claimed for tax purposes. For a long time, these losses were only partially deductible. This changed with the Annual Tax Act 2024:

• The previous loss deduction limit of 20.000 Euro per year was abolished (retroactively for all open cases).
• At the same time, the previous rule applies again: losses from shares may only be offset against gains from share sales – not against interest or dividends (§ 20 para. 6 sentence 4 EStG).

Loss offset: Automatically by the bank or in the tax return?

Loss offset by banks:

Banks maintain two loss offset pots for each customer:

• General loss pot – for interest, dividends, funds, etc.
• Share loss pot – only for gains and losses from share sales

Within the respective pot, an automatic offset takes place. However:

• Losses from worthless shares were often not included in the loss pot – especially if they exceeded 20.000 Euro.
• Therefore, a loss certificate is usually required in these cases.

What do you need to do?

1. Apply for a loss certificate from the bank by 15 December.
2. Enter the certified losses in the KAP form:
   • Share losses separately
   • Other losses separately

Tip: Check your tax certificate for notes such as „Unbalanced losses“ or „Losses according to § 20 para. 6 sentence 6 EStG“. If your bank has not carried out an automatic offset, you must claim these losses via the tax return.

What applies to old losses?

Losses from previous years that were treated according to the old regulation (§ 20 para. 6 sentence 6 EStG old version) may, according to the Federal Ministry of Finance (para. 118 of the letter dated 14 May 2025), be transferred to the general loss pot for simplification purposes – even if they were originally only deductible with share gains.

What applies to the sale of worthless shares?

The sale of worthless shares is treated for tax purposes like a write-off. Shares are considered „worthless“ if the sale proceeds are not higher than the transaction costs (BMF letter dated 03.06.2021).

Example: Many investors sold their Varta shares at a symbolic value before the write-off. The loss is tax-relevant – but only deductible with share gains.

Constitutional doubts?

The Federal Fiscal Court (BFH) considers the restriction on loss offset to be constitutionally questionable. The matter is currently before the Federal Constitutional Court (Ref. 2 BvL 3/21). Tax assessments are provisional on this point – an objection is not necessary (BMF letter dated 31.01.2022).

Important: The losses must still be entered in the tax return and supported by a loss certificate!

Also for derivatives: Loss limit lifted

The limit of 20.000 Euro also applied to losses from derivatives (e.g. options). This has also been lifted. The general rules for loss certificates and entry in the KAP form apply accordingly.

Conclusion: How to proceed

• Check losses – are worthless shares affected?
• Apply for a bank certificate – by 15 December
• Fill in the KAP form – separate by loss types
• Apply for a favourable tax rate if applicable
• Check tax assessment – whether it is provisional

Tip: It is better to speak to the tax office than the bank. The latter is bound by the instructions of the Federal Ministry of Finance (§ 44 para. 1 sentence 3 EStG) and may not deviate – even if the regulation is questionable.