Since the banks give you almost no interest in Germany, the only way to earn money from your saving is investing in stocks or ETFs. If you don’t speak German very well, it might be hard for you to invest the money that you save.
Unfortunately, almost all of the banks in Germany don’t have English support for their investment products. So it might be hard for you to trust those products with your savings. I had the same situation when I was looking for an investment product in Germany, then I found a company that is called DEGIRO. (it a company based in The Netherlands but it is being bought by a German company recently) DEGIRO supports English and also they have really low fees. When I first registered to DEGIRO, I thought everything will be easy as investing from your bank account but there are a few things that you need to keep in mind.
First, DEGIRO doesn’t support English on their degiro.de website. When I talked with their customer support, they told me that I can use their Ireland website (degiro.ie) since it is in English and Ireland also use Euro.
Second, unfortunately, DEGIRO doesn’t handle your taxes. So you need to handle your capital gain taxes yourself. Now, the problem here is how you are going to do that. First, you need to know that if you are investing in ETFs, you should invest in the ones that give you dividends (disturbing). Why? Because Germany introduced a very complex way of paying taxes based on the increase in your investment value (pre-payment) if you are holding accumulating ETFs. Because of that, I suggest you buy disturbing ETFs so calculating your taxes would be easy. Also, you have an 801€ yearly tax-free allowance so if you invest in disturbing ETFs, you can also use this allowance and don’t pay taxes if you don’t earn more than the threshold for your dividends.
DEGIRO will share the Annual Tax Report Addition next year in February and there you can see how much you earned as dividend in total. If you exceed the tax-free allowance threshold, you have to pay taxes. The tax rate for capital gains is 26.375%. If you are using tools like SteuerGo (I used for the last 3 years and I am happy with it) to fill in your tax return, you can see how much you are going to pay taxes. The important part that you need to know here is where to put the capital gain information into your tax return form. On the tax return form, there is a section which is called
Anlage KAP and there you will see
15. Ausländische Kapitalerträge (ohne Betrag laut Zeile 58). That’s the section that you need to enter all the money that you get as dividend during your tax year. No matter if you exceed the limit or not, you have to declare your dividend income in this section. If you exceed the threshold, you will see how much you need to pay as capital tax. When you submit your tax return, your Finanzamt will calculate the tax that you need to pay again. (There could be a small difference between them) If you have to pay taxes, you need to send the amount into the tax office’s bank account.
If you are submitting a tax return the first time, you will receive a letter about how much you need to pay or receive from your Finanzamt after a few weeks or months. You will be able to find the bank account of your tax office in the letter but there is another important thing here. While sending the money, you need to enter your Steuernummer (tax number: XX/XXX/XXXXX), Abgabeart (type, in this case:
Kapitalertragsteuer), and Zeitraum (period, for example, 2019) in the description of your payment. So in the end your description should look like:
XX/XXX/XXXXX Kapitalertragsteuer 2019. In this way, your Finanzamt can easily identify your payment and process it. That’s all you need to know regarding paying taxes.
Disclaimer: I am not a tax advisor. The information that I shared here could be wrong. Please talk with a tax advisor to get the right information. I just shared the way that worked for me while handling my capital gains from the dividends.