Which income is considered investment income?
With the introduction of the withholding tax, it is generally no longer necessary to submit the KAP form. However, in some cases you must still complete the KAP form:
- the capital gains are not subject to tax deduction (e.g. sale of GmbH shares of less than 1 percent)
- income from foreign accumulating investment funds
- income (interest, dividends, etc.) from foreign accounts or deposits
- interest from loan agreements between private individuals
- interest on tax refunds
- sale of endowment life insurance policies (for contracts concluded from 2005)
Note: For certain income, you must also complete the KAP-INV form (for income from investment earnings not subject to domestic tax deduction) or KAP-BET form (for income from capital assets in the case of shareholdings, if the income and the tax to be credited have been determined uniformly and separately).
Furthermore, the KAP form must be completed in the case of an optional assessment if:
- a loss carryforward from previous years is to be taken into account or a loss offset of income from capital assets is to be made, or
- the saver’s allowance has not been fully utilised, or
- church tax has not been deducted despite church tax liability, or
- foreign taxes are still to be taken into account, or
- to check the amount of the capital gains tax deduction.
If you wish to apply for a so-called favourable tax rate check, you must also complete the KAP form. This may allow you to benefit from a lower tax rate with your individual tax rate if it is lower than the withholding tax rate of 25 percent.
(2021): Which income is considered investment income?
How do capital gains affect the reasonable burden and exceptional costs?
In principle, capital gains that have already been subject to withholding tax are not taken into account when determining the total income. If extraordinary expenses were claimed at the same time, capital gains had to be declared in the past.
This was because capital income was included in the income to calculate the individual reasonable burden. This has not been the case since 2012.
The omission of capital gains leads to a tendency for the reasonable burden (x% of the total income) to be lower when deducting extraordinary expenses – an advantage for you.
You do not need to declare capital income if you wish to claim extraordinary expenses.
(2021): How do capital gains affect the reasonable burden and exceptional costs?
