As of: March 29, 2024, 5:25 a.m
By: Carmen Mörwald
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Anyone who has investment funds in their portfolio will have to pay taxes in 2024. The reason is the increased interest rate and a reform introduced six years ago.
Frankfurt – Due to the investment tax reform that came into force in 2018, funds and ETFs must be taxed – even if they are in the portfolio. An advance flat rate is deducted from the increases in value. The new tax has not yet taken effect. That's changing now: Due to increased interest rates, savers will soon have to pay more.
Savers will have to pay in 2024: That's why the advance flat rate was introduced
If savers hold funds or ETFs in their portfolios, income is usually taxed when the shares are sold. Originally, before the tax reform took place, a distinction was made between distributing and accumulating funds or ETFs when paying dividends. With distributing funds, the dividends are passed on directly to investors, making the entire amount taxable. In accumulating models, on the other hand, dividends are reinvested so that the tax could be deferred until the shares are sold.
This handling changed with the introduction of the investment tax reform six years ago and the associated advance flat rate. The aim of the tax is to eliminate the described tax inequality between distributing and accumulating investments. With this, “the accumulated income of accumulating funds should now also be taxed annually,” as portfolio manager Tobias Wagner explains at
Focus Online
. In concrete terms, this means that under certain circumstances a payment would be due even without the prior realization of profits, according to the expert.
A new tax means savers will have to pay more in 2024. © Roman Möbius / Imago
It becomes expensive for savers because of the base interest rate: this is how the advance flat rate is determined
Although the advance flat rate for savers was introduced in 2018, it has not yet been used due to the calculation method. The flat rate is determined based on the Bundesbank’s base interest rate. Wagner explains that this was zero for a long time. “For 2023, however, the base interest rate was set by the Bundesbank at 2.55 percent. This means that relevant tax amounts are now coming to investors for the first time,” says the portfolio manager. The percentage thus forms the starting point for the amount of the advance flat rate retained for the beginning of 2024.
Calculate an upfront flat rate – an example
An investor holds shares of an accumulating ETF in his portfolio that have a value of 10,000 euros at the beginning of 2023. The system develops well over the year and generates an increase of ten percent, i.e. 1000 euros. Now 70 percent of the base interest rate is multiplied by the initial fund value. That means 1.785 percent times 10,000 euros, which results in a value of 178.50 euros. If you are assuming a stock ETF, another special feature must be taken into account. A partial exemption would apply here, with the result that only 70 percent of the previously calculated flat rate would be used. For the example, this would ultimately result in an amount of 124.95 euros, which also represents the assessment basis for the withholding tax of 25 percent. Ultimately, in this case, the investor pays 31.24 euros in advance.
In practice, the custodian institution, i.e. the bank or broker, is responsible for calculating the advance flat rate. Accordingly, the tax is collected automatically, according to economic expert Christine Bergmann from the clearing account. “There should be enough money on it, otherwise there could be problems with the bank,” she explains to
BR
. “It would also be important to check your exemption order.” Anyone who has several accounts and securities accounts should at least be able to roughly estimate how high the respective income will be.
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An upfront flat rate is not always due: savers need to keep this in mind
Above all, an exemption order should be paid to the respective bank, as capital gains of up to 1,000 euros per person per calendar year and up to 2,000 euros for couples are tax-free. “Because then they fall under the saver allowance,” says Bergmann. Furthermore, the advance flat rate is not due if the fund shares have not increased in value. The prerequisite is that the investment did not achieve any increase in value in the period under consideration. If the annual profit of the fund or ETF is less than the flat rate, savers do not have to pay tax on their income.
Regardless of the performance of their funds or ETFs, savers can already expect a slightly lower upfront fee at the beginning of next year. The base interest rate for 2024 was reduced to 2.29 percent. However, it is important to note that the flat rate represents special tax treatment and investors may need to plan accordingly. It is generally recommended that you seek advice from a tax advisor or financial expert in order to understand the impact on your personal financial situation.
(cln)