As of: March 26, 2024, 6:28 a.m
By: Tim Krupka
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The advance flat rate must be paid before any income is realized.
© Guido Schiefer/imago
Some investors may have been informed by their bank at the beginning of the year of a new tax in the form of the advance flat rate.
Who the new tax affects.
If savers hold funds or ETFs in their portfolios, they usually tax any income in the form of price increases when they sell the shares.
However, when dividend payments are made, the consideration is somewhat more complex.
A distinction must be made here between distributing and accumulating funds or ETFs.
The former pass on the dividends directly to investors, with the entire amount immediately becoming taxable.
In accumulating models, on the other hand, dividends are reinvested, meaning that the tax could previously be deferred until the shares were sold.
This changed with the investment tax reform in 2018. Its aim was to eliminate the described unequal tax treatment between distributing and accumulating investments.
For this purpose, the so-called advance flat rate was introduced.
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 a tax payment may be due even without the prior realization of profits, according to the expert.
How the advance flat rate is determined
In order to arrive at a concrete value for the advance flat rate, a few steps and parameters are necessary.
Of particular importance is the base interest rate, which is announced by the Ministry of Finance at the beginning of each year and is determined on the basis of current yields on German government bonds, says Timo Halbe from the advice portal
Finanztip.
“Since this base interest rate has been zero or even negative in recent years, the advance flat rate has also been zero in recent years,” Halbe continued.
For 2023, however, it was set at 2.55 percent and thus forms the starting point for the amount of the advance flat rate retained at the beginning of 2024. The following example shows how this is calculated.
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 10 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 implementation of the aforementioned steps is carried out by the depository provider, so savers do not have to worry about it themselves.
When the advance flat rate is not due
According to the business magazine
Capital
, there are essentially two constellations that speak against levying taxes on the advance flat rate.
On the one hand, this does not apply if the annual profit of the fund or ETF is less than the flat rate.
In the other scenario, it will not be due because the investment did not achieve any increase in value in the period under consideration.
So that savers can avoid the tax in the event of a levy, it is also possible to set up an exemption order with the respective bank.
Capital gains of up to 1,000 euros per person per calendar year are currently tax-free.
What investors also need to pay attention to
In January of each year, the broker automatically withholds the advance fee.
Savers should therefore ensure in advance that the settlement account has sufficient funds to avoid later complications.
Otherwise, the bank will report the matter to the tax office, according to
Capital magazine.
To ensure that this doesn't happen, the consumer portal
Finanztip
has designed its own calculator to help investors determine the amount of the advance flat rate.
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Investors can already expect a slightly lower upfront fee at the beginning of next year, regardless of the performance of their funds or ETFs.
The base interest rate for 2024 was reduced to 2.29 percent.
And some positive news at the end.
There would be no double taxation of income because the taxes paid in advance would be offset when the shares were sold, says portfolio manager Wagner.