Expat Investing in Germany: Brokers, Taxes, and Depot Transfers

Moving your investments to Germany is not just a question of which app to download. Once you become resident for tax purposes, Germany taxes your worldwide investment income — dividends, interest, and capital gains — under a flat capital gains tax called the Abgeltungsteuer, and it applies a forward-looking pre-payment tax called the Vorabpauschale to accumulating funds even when no dividend was paid. This guide compares the brokers expats in Germany actually use, explains how the flat tax and the €1,000 tax-free allowance fit together, decodes the Vorabpauschale in plain terms, walks through a tax-free securities transfer (Depotübertrag), and flags the FATCA and PFIC complications that make US passport holders a special case. It is general information, not individual tax or investment advice — confirm the current rules with the Bundeszentralamt für Steuern, your broker, and a qualified tax adviser before you act.

Choosing the Right German Brokerage (Neobrokers vs. Traditional Banks)

A German brokerage account is called a Depot — the securities account that holds your shares and ETFs, separate from your everyday current account (Girokonto). You can open a Depot at a traditional bank, a direct bank, or a neobroker. For most expats the choice comes down to fees, the product range, English-language support, and — critically for US persons — whether the broker will accept your tax residency at all. The three names that come up most often are Trade Republic, Scalable Capital, and Interactive Brokers (IBKR), but their eligibility rules differ, so confirm the current terms on each broker’s website before you apply.

The US-person row is the one that catches Americans off guard. Trade Republic and Scalable Capital are German institutions subject to FATCA, and both generally decline to open accounts for US citizens and green-card holders because of the reporting burden — confirm the current policy on each broker’s website, as eligibility can change. Interactive Brokers typically accepts US persons but routes them to its US-regulated entity, which is not a German Depot and does not withhold German tax automatically. If you are a US person, read the FATCA and PFIC section below before you choose a broker.

How Capital Gains Tax (Abgeltungsteuer) Works for Foreigners

Germany does not tax investment income at your personal income-tax rate. Since 2009 it has applied a flat capital gains tax, the Abgeltungsteuer, of 25% on investment income — dividends, interest, and capital gains on securities. On top of the 25% comes the Solidaritätszuschlag, a 5.5% surcharge levied on the tax itself (not on the income), which adds roughly 1.375 percentage points. If you are liable for church tax (Kirchensteuer) — typically 8% in Bavaria and Baden-Württemberg and 9% elsewhere, again on the tax — the combined rate lands around 26.4% to 28% for most taxpayers. The church tax only applies if you are registered with a recognised church.

The flat rate is the headline, but two things soften it. First, the Teilfreistellung (partial exemption) reduces the taxable base on equity funds and mixed funds: 30% of gains on equity funds (Aktienfonds) and 15% on mixed funds (Mischfonds) are tax-free, so only 70% or 85% of the gain is taxed. Bond funds and pure equity holdings get no partial exemption. Second, if your personal income-tax rate is lower than the flat rate — rare, but possible at low incomes — you can apply to have the investment income taxed at your personal rate instead (Günstigerprüfung), which the Finanzamt does automatically when you file.

For foreign residents the practical point is that a German broker withholds the Abgeltungsteuer automatically when you sell or receive a dividend, so you do not usually pay it yourself — it is gone before the cash lands in your account. A foreign broker that is not set up for German tax reporting does not withhold it, which leaves you to declare and pay it yourself through your annual tax return. That is one reason most resident expats end up moving their portfolio to a German Depot. If you hold investments through a non-German broker, your German filing duty still applies — see our guide to reading your German payslip and tax position for how investment income fits into your annual return.

How to Set Up Your Freistellungsauftrag (€1,000 Tax Exemption)

Every taxpayer in Germany gets a Sparer-Pauschbetrag — a tax-free allowance on investment income. Since 1 January 2023 it has been €1,000 per person per year (up from the previous €801), and married couples assessed jointly get €2,000. Gains, dividends, and interest up to that ceiling are not taxed at all. To actually use it, you must file a Freistellungsauftrag — an exemption order — telling your broker how much of your allowance to apply to that account. Without one, the broker withholds tax on the first euro of gain and you have to reclaim it in your tax return.

1. 01

   Check your total allowance

   Confirm the current Sparer-Pauschbetrag for the tax year — €1,000 per individual since 2023, €2,000 for jointly assessed married couples. The figure is set in § 20 Abs. 9 EStG and can be adjusted by legislation, so verify it on the Bundeszentralamt für Steuern website before you plan around it.

2. 02

   Log in to your broker and open the Freistellungsauftrag settings

   Both Trade Republic and Scalable Capital expose the exemption order in the app under a “Freistellungsauftrag” or “tax exemption” section; IBKR’s EU entity offers it through account management. You can split the allowance across multiple Depots, but the total cannot exceed your ceiling.

3. 03

   Enter the amount and confirm

   Set the euro amount you want applied to that account — the full €1,000, or a portion if you are splitting it. The broker applies it automatically to gains and dividends as they occur, so income up to the limit is paid out gross.

4. 04

   Review it each January

   The exemption order does not renew itself if your circumstances change. Re-check it at the start of each year, especially if you open a new account, close one, or change brokers — and set it up at every broker you use so no account withholds tax unnecessarily.

One subtlety: the Sparerpauschbetrag covers the sum of capital gains, dividends, and interest, not each one separately. If you earn €600 in dividends and €500 in gains, €100 of the gains are taxed. Interest earned at a German bank also draws on the same pool, so coordinate the order across accounts if you hold cash savings as well as securities.

How to Transfer Your Existing Foreign Stock Portfolio to Germany

If you already hold shares or ETFs at a broker abroad, you do not have to sell and rebuy — you can move the securities in kind through a Depotübertrag (securities transfer). Done correctly, an owner-preserving transfer is not a taxable disposal under German law because you neither sell nor change beneficial ownership: the same person owns the same securities, just at a different custodian. The trap is that a transfer is only tax-free when it is genuinely owner-preserving. A gift, a transfer to a spouse, or any change of beneficial ownership is a different event and can trigger gift or capital gains tax.

1. 01

   Open the receiving German Depot first

   Open and fully verify your German brokerage account before you initiate anything. The receiving broker needs an active, KYC-cleared account to accept incoming securities, and the transfer form will ask for the target IBAN and depot number.

2. 02

   Request the transfer from your old broker

   Initiate the Depotübertrag at your current (sending) broker, not the receiving one. Most brokers offer a securities-transfer form; you will list each position (ISIN, quantity) and the destination depot. Some German brokers also provide a pre-filled form to hand to the sending institution.

3. 03

   Attach your cost-basis documentation

   Crucially, ask the sending broker to transfer the acquisition-cost data (Anschaffungsdaten) alongside the securities — purchase dates and prices for each position. If that data does not travel with the transfer, the German depot may record a zero cost basis, and a later sale could be taxed on the full proceeds. Keep your own purchase confirmations as a backup.

4. 04

   Confirm currency and tax residency details

   If the sending broker is outside the eurozone, confirm how currency and any withholding will be handled. Make sure your tax residency and TIN are correctly recorded at the receiving broker so it applies the right withholding and reporting from day one.

5. 05

   Set up your Freistellungsauftrag at the new depot

   Once the securities arrive, set up or move your Freistellungsauftrag to the new account so the €1,000 allowance applies there. Then verify each position’s cost basis imported correctly before you trade.

Timing matters. A transfer in kind avoids a taxable sale, but it does not reset the holding period or the cost basis — your original purchase date and price carry over, which is what you want. If you instead sell abroad and rebuy in Germany, you realise a gain at the old broker (taxable in your current country of residence at the time) and start a new cost basis at the new one. For most resident expats the in-kind Depotübertrag is the cleaner route, provided the cost-basis data travels with it.

Understanding the Vorabpauschale on Accumulating ETFs

The Vorabpauschale is the part of German investment tax that surprises foreign investors most. It is an annual advance tax on accumulating (thesaurierende) funds — ETFs that reinvest dividends rather than paying them out. Germany does not wait until you sell to tax the embedded return; it taxes a notional amount each year, so that accumulating and distributing funds are treated roughly equally. The tax is not a flat euro figure and is not the same every year — it is calculated from the official base rate (Basiszins) published annually by the Bundeszentralamt für Steuern.

In simple terms, the calculation works like this: the tax office takes the Basiszins (a fixed annual base rate set each year) and applies it to the fund’s value at the start of the year, capped at the fund’s return for the year minus prior distributions — so in a year when the fund loses money, the Vorabpauschale is zero. The resulting notional income is then reduced by the Teilfreistellung (the same 30% or 15% partial exemption) and taxed at the Abgeltungsteuer. Your broker calculates and withholds it automatically and shows it on your tax statement (Steuerbescheinigung). You do not compute it yourself.

Because the Basiszins changes each year, the Vorabpauschale on the same holding differs from year to year — it rose sharply when the base rate climbed in 2023–2024 and falls again when the base rate drops. Do not budget around a fixed number; check the current Basiszins on the Bundeszentralamt für Steuern website and your broker’s year-end statement. The practical effect for a buy-and-hold expat is a small annual tax drag on accumulating ETFs even though no cash dividend reached you — which is why some investors prefer distributing funds inside the Freistellungsauftrag window.

Special Tax Rules for US Passport Holders (FATCA & PFIC)

US citizens and green-card holders are a special case in every country, and Germany is no exception. Two layers of complication apply: broker access under FATCA, and US tax treatment of non-US funds under the PFIC rules. Neither is a reason to avoid investing, but both mean Americans usually need a different setup from other expats.

The double-tax angle also differs for Americans. Germany taxes your investment gains as a resident, and the US taxes them too because of citizenship-based taxation. The Foreign Tax Credit (FTC) can offset German tax paid against US tax on the same income, but the credit is limited to the US tax attributable to that income and cannot create a refund — and the Abgeltungsteuer is a flat tax whose interaction with the FTC depends on your whole filing picture. The US-Germany tax treaty’s saving clause means the US keeps its right to tax you, so the treaty reduces but does not remove the overlap. None of this is a recommendation; it is why US expats usually need an adviser who understands both systems.

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