How do you correctly enter employee shares from the USA?
If you have received shares from your US employer as part of an employee programme, you must declare this benefit in your German tax return. In this article, we will explain step by step how to do this easily with Lohnsteuer kompakt – and how to avoid paying double tax.
When are the shares taxable?
If shares are not transferred to you immediately but only after a certain waiting period (known as the vesting period), they are considered to have been "received". From this point on, they belong to you and are considered additional wages in Germany – like a salary in the form of shares.
The value of the shares at the time of transfer must be declared in the tax return and is taxable in Germany. In many cases, your US employer has already withheld taxes on this share value. You can have these US taxes credited in Germany to avoid double taxation.
How to record employee shares in Lohnsteuer kompakt
Enter wages without tax deduction
In Lohnsteuer kompakt, navigate to:
"Income from employment" → "Other income" → "Wages without tax deduction"
Enter the full market value of the transferred shares there – e.g. 20.000 Euro.
Credit foreign tax
Go to:
"Foreign income" → "Creditable foreign taxes"
Add the following information:
- Country of origin: USA
- Income: 20.000 Euro
- Creditable tax: e.g. 10.000 Euro, if verifiable
The tax office will then check whether and to what extent the US tax can be offset against your German tax.
Additional information for the tax office (recommended)
It is best to supplement your tax return with a brief explanation in the "Message to the tax office" section.
Example: As part of my US employer's employee share programme, shares with a total value of 20.000 Euro were transferred to me in 2024. Of this, 50% (10.000 Euro) was withheld as a flat-rate tax. I apply for the crediting of this foreign tax in accordance with the Germany–USA DTA.
Submit documents (recommended)
Submit documents from your employer or broker with your tax return showing the market value of the transferred shares and the amount of foreign tax withheld. Although it is not mandatory to provide this evidence, it is recommended to avoid queries from the tax office and to clearly demonstrate the crediting of the foreign tax.
Tip: After submitting the tax return, you have the option to submit the documents electronically with Lohnsteuer kompakt.
What applies when selling the shares later?
If you sell the shares later and make a profit, you must pay tax on this profit in Germany. This is called capital gains tax. The value the shares had when received (e.g. 20.000 Euro) is considered the "starting value". Only the profit above this must be taxed.
Example: You sell the shares later for 25.000 Euro. Since the purchase value is 20.000 Euro, only 5.000 Euro must be taxed.
How do you correctly enter employee shares from the USA?
Which income is considered capital 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:
- 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
- surrender of endowment insurance policies (for contracts concluded from 2005)
Note: For certain income, you must also complete the KAP-INV form (for income from investment income 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.
Losses from worthless shares in the case of pure account write-offs may be offset against income from capital assets, but there is a limit on the amount. Losses can only be offset against income from capital assets up to a maximum of 20,000 Euro. Unused losses are then carried forward to subsequent years. Important: In the case of worthless shares, the bank does not carry out a loss offset. It does not include losses in the loss pot. Losses from worthless shares must therefore be included in the tax return.
Which income is considered capital income?
Can I claim income-related expenses from capital assets?
With the deduction of withholding tax, the tax liability for capital gains is generally settled. This means that expenses related to earning income can no longer be considered as deductible expenses upon proof. They are covered by the saver’s allowance of 1.000 Euro for single persons and 2.000 Euro for married couples.
Actual expenses cannot be deducted even in the favourable tax rate test. If your personal tax rate is below 25%, you can apply for your capital gains to be taxed at your individual tax rate in the tax return under "Anlage KAP" and thus correct the deduction of withholding tax of 25% in your favour (so-called favourable tax rate test). However, even with this "optional assessment at the individual tax rate", it is not possible to claim expenses upon proof (BFH ruling of 28.1.2015, VIII R 13/13).
However, there is an exception for the "mandatory assessment at the individual tax rate": In some cases, income tax on capital gains is not settled with the capital gains tax deduction. Instead, the capital gains must be declared in the tax return and taxed at the individual tax rate. The withheld capital gains tax is then credited against the tax liability. In this case, the normal tax rules for deducting expenses apply. This means that expenses can be deducted in the proven amount, e.g. interest on debt. No saver’s allowance is granted for these earnings (§ 32d para. 2 EStG).
A mandatory assessment at the individual tax rate may apply for
- Capital gains that belong to other types of income, e.g. rental income or business income,
- Capital gains from the sale of shares in a company with a stake of more than 1%,
- Capital gains from investments in companies as business assets,
- Interest from so-called back-to-back financing,
- Interest from a company or cooperative to its shareholders,
- Interest from private loans between related persons (e.g. spouses) if the borrower uses the loan to generate income and deducts the interest as business expenses or income-related expenses. In this case, the interest income for the lender is not subject to the withholding tax rate of 25% but is taxed like other income at the personal tax rate (§ 32d para. 2 no. 1a EStG).
Can I claim income-related expenses from capital assets?
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 means that when deducting extraordinary expenses, the reasonable burden (x% of the total income) tends to be lower – an advantage for you.
You do not need to declare capital income if you wish to claim extraordinary expenses.
How do capital gains affect the reasonable burden and exceptional costs?
