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Investment trusts without domestic tax deduction

What is the advance lump sum?

The so-called advance lump sum ensures that a certain minimum taxation takes place at the investor level - even in cases where a fund makes no or insufficient distributions. The amount of the advance lump sum always refers to the previous year. When the shares are actually sold, the advance lump sums taxed up to that point are deducted from the proceeds of the sale (proceeds of sale minus acquisition data minus advance lump sum).

This means that a capital gain is reduced (and thus the tax burden). In the case of a capital loss, the advance lump sum already calculated increases your capital loss. Double taxation is therefore excluded.

The advance lump sum has been levied and taxed since the beginning of 2019.

What is the advance lump sum?

What is the advance flat rate?

At the beginning of January 2019, the German tax authorities charged investment savers an advance lump sum for the first time for the year 2018. This was used to tax income from accumulating and partially accumulating funds. The advance lump sum is, economically speaking, a pre-taxation of future capital gains. Therefore, it is deducted from the actual capital gain when the fund shares are sold.

The advance lump sum is not based on the actual profits but is calculated using a specific formula. The advance lump sum amounts to 70 per cent of the annual base interest rate of the Bundesbank multiplied by the value of the fund share at the beginning of the year (so-called base return). The base return is limited to the excess amount that results between the first and last redemption price plus distributions. If no redemption price is set, the stock exchange or market price applies instead.

For the year 2020, the BMF announced a base interest rate of 0.07 per cent, which the Deutsche Bundesbank calculated on 2.1.2020 based on the yield curve data. 70 per cent of the base interest rate is 0.049 per cent. The withholding tax of 25 per cent plus solidarity surcharge and, if applicable, church tax is then applied to this. And this amount is to be taxed as an advance lump sum. However, the - fictitious - inflow only occurred in the following year, specifically on 4.1.2021. The inflow regulation results from the legal provision of § 18 para. 3 InvStG (BMF letter of 29.1.2020, BStBl 2020 I p. 218).

Currently, the following applies to the advance lump sum for the year 2023:

The base interest rate on 2.1.2023 is 2.55 per cent. 70% of the base interest rate is 1.785 per cent. The withholding tax of 25 per cent plus, if applicable, solidarity surcharge and church tax is then applied to this.
The advance lump sum is deemed to have been received by the investor on the first working day of the following year, i.e. on 2.1.2024 (BMF letter of 4.1.2023, IV C 1-S 1980-1/19/10038:007).

What is the advance flat rate?

What is partial exemption?

For certain domestic income, there is an additional burden of corporation tax at the fund level for public investment funds. To offset this pre-taxation at the fund level, fund distributions, advance lump sums, and capital gains from the sale of fund units are partially exempt from tax. This is referred to as a "partial exemption".

The rate of the fund-specific partial exemption depends on the type of fund (as of October 2018):

30% for equity funds (at least 51% equity according to the investment conditions)
15% for mixed funds (at least 25% equity according to the investment conditions)
60% for real estate funds (at least 51% in real estate or real estate companies according to the investment conditions)
80% for real estate funds with a foreign focus (at least 51% in foreign real estate or foreign real estate companies according to the investment conditions)

The classification of a fund into a fund category is based on the investment policy by the fund company (investment company). They provide the qualification of the fund (e.g. equity or mixed fund).

The tax certificate from the custodian banks usually states: "Total of all positive capital income, gains and earnings (including distributions, advance lump sums and gains from the sale of investment units after partial exemption)." The individual items are then explained in more detail. Investors should carefully check whether this is also the case with their tax certificate. If the disclosure has not been made: You should request the statement on the equity ratio, real estate ratio, etc. from your fund provider if it has not already been sent to you unsolicited.

These figures are often already published online in the annual reports. Check the relevant ratios of your fund. If, for example, the equity ratio is consistently more than 50%, a partial exemption of 30% should be applied, which must be claimed in the tax return - and not with the fund provider or the custodian bank. Failure to do so may result in paying too much income tax on your capital income.

What is partial exemption?

Which funds are affected by the advance flat rate?

In principle, all domestic and foreign investment funds (including ETFs) can be affected by the advance lump sum.

For distributing funds, any distribution made is taken into account when calculating the advance lump sum. If the distribution is sufficiently high, no advance lump sum is incurred. It can therefore be assumed that the advance lump sum mainly affects accumulating funds.

Which funds are affected by the advance flat rate?

Is the withholding tax on the advance lump sum credited upon a later sale?

Yes, when the fund shares are sold at a later date, all advance lump sums of the fund that have already been taxed are deducted from the sales proceeds on a pro rata basis.

This is to avoid double taxation.

Is the withholding tax on the advance lump sum credited upon a later sale?

Field help

Credited foreign taxes (line 40 of Form KAP)
Credited foreign taxes (line 40 of Form KAP)
Credited foreign taxes (line 40 of Form KAP)
Credited foreign taxes (line 40 of Form KAP)

Here you enter the credited foreign taxes according to line 51 of your tax statement.

Сreditable foreign taxes (line 41 of Form KAP)
Сreditable foreign taxes (line 41 of Form KAP)
Сreditable foreign taxes (line 41 of Form KAP)
Сreditable foreign taxes (line 41 of Form KAP)

Here you enter the credited foreign taxes according to line 52 of your tax statement.

Notional foreign taxes (line 42 of Form KAP)
Notional foreign taxes (line 42 of Form KAP)
Notional foreign taxes (line 42 of Form KAP)
Notional foreign taxes (line 42 of Form KAP)

Here you enter the notional foreign tax at source according to line 53 of your tax statement.

Have foreign tax deductions been credited?
Have foreign tax deductions been credited?
Have foreign tax deductions been credited?
Have foreign tax deductions been credited?

Select "yes" if foreign taxes have already been withheld in 2024.

The foreign taxes can be credited against the German tax. However, possible tax credit regulations under a possible double taxation agreement (DTA) must be taken into account.

Has a remaining allowance been determined for protected old shares of investment trusts?

If a remaining allowance for protected old shares in investment trusts has been determined for you by 31.12.2023, please select "yes" here.

The allowance of 100.000 Euro for old stocks is determined and offset by the tax office as soon as parts of the old stock are sold and a tax return is filed. Only at this point the assessment procedure begins. The remaining tax-free amount can be found in the tax assessment notice of the previous year. If the tax-free amount has been completely used up, it is determined annually as zero.

Do you want to enter the current income from fund shares?

If you want to enter current income from fund shares, please select "yes".

In the following lines, please enter, separately by fund type, the distributions received in 2024 from fund shares that were not subject to domestic tax deduction.

Distributions are all amounts actually paid or credited to you as an investor, including any foreign taxes withheld. In particular, the following are considered to be distributions:

cash distributions,
reinvestment of the earnings,
distributions in kind and
compensation and goodwill payments.

Distributions paid out during the processing of an investment trust are considered income only to the amount of the so-called increase in value.

Line 4 Distributions from equity funds before partial exemption

Enter here the amount of distributions from equity funds before partial exemption. The partial exemption for equity funds is 30 %.

Equity funds are all investment trusts that invest more than 50 % of their assets in equity investments.

Distributions are all amounts actually paid or credited to you as an investor, including any foreign taxes withheld. In particular, the following are considered to be distributions:

cash distributions,
reinvestment of the earnings,
distributions in kind and
compensation and goodwill payments.

Line 5 Distributions from balanced mutual funds before partial exemption

Enter here the amount of distributions from balanced mutual funds before partial exemption. The partial exemption for balanced funds is 15 %.

All balanced mutual funds that invest at least 25 % of their assets in equity investments are considered balanced mutual funds.

Distributions are all amounts actually paid or credited to you as an investor, including any foreign taxes withheld. In particular, the following are considered to be distributions:

cash distributions,
reinvestment of the earnings,
distributions in kind and
compensation and goodwill payments.

Line 6 Distributions from property funds before partial exemption

Enter here the amount of distributions from property funds before partial release. The partial release for property funds is 60%.

Property funds are all investment funds that invest more than 50% of their assets in property and/or property companies.

Distributions are all amounts actually paid or credited to you as an investor, including any foreign taxes withheld. In particular, the following are considered to be distributions:

cash distributions,
reinvestment of the earnings,
distributions in kind and
compensation and goodwill payments.

Do you want to enter the investment income for all fund shares individually?
Enter information about fund shares

Select "yes" if you want to enter information for each individual investment trust. You can then enter all purchases and sales by fund type on the following pages and thus calculate the exact distributions, advance flat rates and profits/losses from the sales.

Select "no" if you have a list from the foreign credit institution in which you can see the total distribution, advance flat rate and profit/loss amounts from sales.

Do you want to enter profits and losses from fund shares?
(lines 14 - 28 of Form KAP-INV)

If you want to enter information on profits and losses from the sale of fund shares, please select "yes".

The following are also considered to be sales of fund shares:

return,
assignment,
withdrawal or
hidden contribution.

All profits and losses that were not subject to domestic tax deduction must be reported separately according to fund type for 2024.

Line 14 Profits and losses before partial exemption
Line 17 Profits and losses before partial exemption
Line 20 Gains and losses before partial exemption
Line 23 Profits and losses before partial exemption
Line 26 Profits and losses before partial exemption

Specify here profits and losses from the sale of fund shares.

The following are also considered to be sales of fund shares:

return,
assignment,
withdrawal or
hidden contribution.

All profits and losses that were not subject to domestic tax deduction must be reported separately according to fund type for 2024.

Line 7 Distributions from foreign property funds before partial exemption

Enter here the amount of distributions from foreign property funds before partial exemption. The partial exemption for foreign property funds is 80 %.

Foreign property funds are all investment trusts that invest more than 50 % of their assets in foreign properties and/or property companies.

Distributions are all amounts actually paid or credited to you as an investor, including any foreign taxes withheld. In particular, the following are considered to be distributions:

cash distributions,
reinvestment of the earnings,
distributions in kind and
compensation and goodwill payments.

Line 8 Distributions from other investment trusts

Enter here the amount of distributions from other investment trusts. There is no partial exemption for other investment trusts.

If the investment trust does not belong to any of the types listed above, the distributions must be stated here.

Distributions are all amounts actually paid or credited to you as an investor, including any foreign taxes withheld. In particular, the following are considered to be distributions:

cash distributions,
reinvestment of the earnings,
distributions in kind and
compensation and goodwill payments.

Do you want to enter the advance flat rates according to sect. 18 of the Investment Tax Act (InvStG)?

Select "yes" if you want to enter the advance flat rates in accordance with sect. 18 of the Investment Tax Act (InvStG).

Since 2019, all investment units have been taxed at the advance flat rate. The advance flat rate is a flat-rate, annually retrospective minimum tax. Advance flat rates are considered to have been received on the first working day of the following calendar year. The advance flat rate for 2023 is therefore considered to have been received on 2 January 2024.

Note: Please enter the advance flat rates to which you are entitled that have not been subject to domestic tax deduction, broken down by fund type.

Base interest rate for 2024: The base interest rate is 2,29 %. 70 % of this results in an advance flat rate of 1,603 %. This is considered to have been received on 2 January 2025 (letter of the Federal Ministry of Finance (BMF) dated 05.01.2024).

Base interest rate for 2023: The base interest rate is 2,55 %. 70 % of this results in an advance flat rate of 1,785 %. This is considered to have been received on 02.01.2024 (letter of the Federal Ministry of Finance (BMF) dated 04.01.2023).

The final withholding tax of 25% is applied to the calculated amount, plus the solidarity surcharge and, if applicable, church tax.

Line 9 Advance flat rates from equity funds before partial exemption

Enter the amount of the advance flat rates from equity funds before partial exemption.

Note: Please enter the advance flat rates to which you are entitled that have not been subject to domestic tax deduction, broken down by fund type.

The final withholding tax of 25% is applied to the calculated amount, plus the solidarity surcharge and, if applicable, church tax.

Line 15 ... profits from old shares contained therein
Line 18 ... profits from old shares contained therein
Zeile 21 ... profits from old shares contained therein
Line 24 ... profits from old shares contained therein
Line 27 ... profits from old shares contained therein

If the stated income also includes gains from protected old shares, please state it here.

Line 16 Profits and losses from the deemed disposal of old shares
Line 19 Profits and losses from the deemed disposal of old shares
Line 22 Profits and losses from the deemed disposal of old shares
Line 25 Profits and losses from the deemed disposal of old shares
Line 28 Profits and losses from the deemed disposal of old shares

Enter here gains and losses from the notional sale of old shares. The notional income is taxable only at the time of the actual sale and is therefore not included in the above-mentioned income.

Do you want to record interim gains according to the Investment Tax Act 2004?

If you also want to enter interim gains according to the Investment Tax Act 2004, please select "yes".

In the case of old shares, the interim gains calculated as of 31.12.2017 are taxable at the time of the actual sale. Investment trusts were therefore notionally sold on 31.12.2017 and are thereafter considered as acquired again.

The notional sales profits must then be taxed when the investment shares are actually sold.

Line 29 Interim gains from deemed disposal as of 31.12.2017

Enter here the total of the interim gains from deemed disposals as of 31.12.2017.

In the case of old shares, the interim gains calculated as of 31.12.2017 are taxable at the time of the actual sale. Investment funds were therefore notionally sold as of 31.12.2017 and are thereafter deemed to have been acquired again.

The notional sales profits must then be taxed when the investment shares are actually sold.

Line 10 Advance flat rates from balanced mutual funds before partial exemption

Enter the amount of the advance flat rates from mixed funds before partial exemption.

Note: Please enter the advance flat rates to which you are entitled that have not been subject to domestic tax deduction, broken down by fund type.

The final withholding tax of 25% is applied to the calculated amount, plus the solidarity surcharge and, if applicable, church tax.

Line 11 Advance flat rates from property funds before partial exemption

Enter the amount of the advance flat rates from real estate funds before partial exemption.

Note: Please enter the advance flat rates to which you are entitled that have not been subject to domestic tax deduction, broken down by fund type.

The final withholding tax of 25% is applied to the calculated amount, plus the solidarity surcharge and, if applicable, church tax.

Line 12 Advance flat rates from foreign property funds before partial exemption

Enter the amount of the advance flat rates from foreign real estate funds before partial exemption.

Note: Please enter the advance flat rates to which you are entitled that have not been subject to domestic tax deduction, broken down by fund type.

The final withholding tax of 25% is applied to the calculated amount, plus the solidarity surcharge and, if applicable, church tax.

Line 13 Advance flat rates from other investment funds

Enter the amount of the advance flat rates from equity funds before partial exemption.

Note: Please enter the advance flat rates to which you are entitled that have not been subject to domestic tax deduction, broken down by fund type.

The final withholding tax of 25% is applied to the calculated amount, plus the solidarity surcharge and, if applicable, church tax.

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Investment trusts without domestic tax deduction

What is the advance lump sum?

What is the advance flat rate?

What is partial exemption?

Which funds are affected by the advance flat rate?

Is the withholding tax on the advance lump sum credited upon a later sale?

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Lohnsteuer kompakt FAQs

With IntelliScan KI betafor effortless refund!

Investment trusts without domestic tax deduction

What is the advance lump sum?

What is the advance flat rate?

What is partial exemption?

Which funds are affected by the advance flat rate?

Is the withholding tax on the advance lump sum credited upon a later sale?

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Just do your tax return with Lohnsteuer kompakt. Ø 1.100 Euro refund in less than one hour.

With IntelliScan KI^beta
for effortless refund!

Just do your tax return with Lohnsteuer kompakt.
Ø 1.100 Euro refund in less than one hour.