Germany–Switzerland · Investment Fund Taxation
§ 20 InvStG · Equity Funds · Mixed Funds · Real Estate FundsPartial Tax Exemption for Swiss Funds and ETFs
If an individual who is tax resident in Germany holds funds or ETFs in a Swiss securities account, part of the investment income may be tax-exempt under section 20 of the German Investment Tax Act (InvStG). For private investors, the partial exemption is generally 30% for equity funds, 15% for mixed funds, 60% for real estate funds and 80% for foreign real estate funds. The decisive factor is the fund’s tax classification, rather than the label “ETF” or the location of the Swiss custodian bank.
Basic Principle
The partial exemption depends on the type of fund
German investment fund tax law taxes certain income at fund level. To compensate, section 20 InvStG exempts specified portions of investment income at investor level.
Whether a partial exemption applies, and at what rate, depends in particular on whether the investment qualifies for tax purposes as an equity fund, mixed fund, real estate fund or foreign real estate fund.
Holding the investment in a Swiss securities account generally does not change this German classification.
Section 20 InvStG
Partial exemption means that only part of the investment income is taxed
If the fund qualifies for a partial exemption, the statutory portion of its investment income remains tax-free.
The remaining percentage generally represents the taxable investment income.
- Equity funds held privately: 30% tax-free
- Mixed funds held privately: 15% tax-free
- Real estate funds: 60% tax-free
- Foreign real estate funds: 80% tax-free
- The partial exemption applies to more than distributions
- The fund’s classification must be supported by evidence
Private Investors
The main partial exemption rates
| Fund type | Basic requirement | Partial exemption | Taxable portion |
|---|---|---|---|
| Equity fund | Continuously invests more than 50% of its assets in qualifying equity investments | 30% | 70% |
| Mixed fund | Continuously invests at least 25% of its assets in qualifying equity investments | 15% | 85% |
| Real estate fund | Continuously invests more than 50% of its assets in real estate and real estate companies | 60% | 40% |
| Foreign real estate fund | Continuously invests more than 50% of its assets in foreign real estate and foreign real estate companies | 80% | 20% |
The table applies to a typical private investor
Higher equity fund exemption rates may apply to individuals holding fund units as business assets and to corporate investors. This page primarily addresses funds held as private investments.
Equity Funds
A 30% exemption requires equity fund status for tax purposes
Under section 2(6) InvStG, an investment fund generally qualifies as an equity fund if its investment terms require it to invest continuously more than 50% of its assets in qualifying equity investments.
For private investors, section 20(1) InvStG then generally exempts 30% of the investment income.
Minimum allocation
The investment terms must generally require a continuous allocation of more than 50% to qualifying equity investments.
Partial exemption
For a private investor, 30% of the investment income generally remains tax-free.
Taxable portion
Generally, 70% of the investment income remains taxable.
An equity ETF does not automatically qualify as an equity fund for tax purposes
The product description, index name or a high actual equity allocation may not be sufficient on its own. For the standard classification, the fund’s investment terms relevant for tax purposes are particularly important.
Mixed Funds
Mixed funds generally qualify for a 15% exemption for private investors
Under section 2(7) InvStG, mixed funds are investment funds whose investment terms require a continuous allocation of at least 25% of their assets to qualifying equity investments.
Section 20(2) InvStG gives mixed funds half the equity fund exemption rate. For private investors, this generally results in a 15% partial exemption.
Qualifying equity investments
A continuous allocation of at least 25% of the fund’s assets must be required.
Partial exemption
The partial exemption for private investors is generally 15%.
Taxable portion
Consequently, 85% of the investment income generally remains taxable.
Real Estate Funds
Real estate funds may qualify for a 60% or 80% exemption
Under section 2(9) InvStG, a real estate fund generally requires investment terms providing for continuous investment of more than 50% of its assets in real estate and real estate companies.
A foreign real estate fund must correspondingly invest more than 50% of its assets in foreign real estate and foreign real estate companies.
Real estate funds
Generally, 60% of the investment income is tax-free.
Foreign real estate funds
Generally, 80% of the investment income is tax-free.
Real estate allocation
The relevant allocation must generally be met continuously under the fund’s investment terms.
Equity and real estate fund exemptions cannot be combined
Under section 20(3) InvStG, applying the real estate or foreign real estate fund exemption excludes the equity fund exemption.
Scope
The partial exemption applies to more than distributions
The partial exemption applies to the investor’s investment fund income and can therefore cover several types of income.
Distributions
Only the taxable portion of distributions from a qualifying fund is included in taxable income.
Vorabpauschale
The advance lump-sum investment income amount (Vorabpauschale) is generally also subject to the applicable partial exemption.
Disposal gains
Tax gains from selling qualifying investment fund units are also partially exempt at the applicable rate.
The partial exemption generally also affects losses
The partial exemption is not solely a tax benefit for gains. Where income is partly tax-exempt, the corresponding percentage generally also affects the tax recognition of related losses and expenses.
Fund Classification and Evidence
For a Swiss account, the German fund classification needs reliable documentation
German custodian banks can often account for a fund’s tax classification automatically within their investment income withholding tax procedures.
With a Swiss securities account, the applicable German partial exemption for the specific unit class generally needs to be reviewed independently.
Identify the ISIN
Identify the fund’s exact unit class.
Review investment terms
Check the minimum investment allocations relevant for tax purposes.
Determine the fund type
Equity fund, mixed fund, real estate fund or no qualifying category.
Retain the evidence
Archive factsheets, the prospectus, investment terms and other fund documents.
Actual investment allocations can be substantiated under certain conditions
On application, section 20(4) InvStG also allows an investor to demonstrate that the fund actually and continuously exceeded the relevant equity fund, mixed fund or real estate fund threshold throughout the calendar year.
This evidence may trigger later documentation requirements
If a partial exemption is obtained by proving the actual investment allocation under section 20(4) InvStG, subsequent losses may give rise to additional evidence requirements covering the entire holding period. This approach should therefore be supported by a clear documentation process.
Swiss Bank Documents
Swiss fund classifications do not automatically establish German tax status
A Swiss tax report may show tax values, taxable income, fund descriptions or distributions.
This information does not automatically answer the German tax question of whether a fund qualifies as an equity fund, mixed fund or real estate fund under sections 2 and 20 InvStG.
Distinguish the account’s location from the fund’s domicile
An ETF in a Swiss securities account may, for example, be domiciled in Ireland or Luxembourg and track a U.S. equity index.
The location of the Swiss bank is not the decisive criterion for the German partial exemption.
- Swiss bank ≠ Swiss fund
- ETF ≠ automatic equity fund status
- Fund name ≠ evidence of tax classification
- Identify the exact ISIN and unit class
- Review the investment terms
- Document the classification under German investment tax law
Example
Equity ETF with EUR 10,000 of investment income
The fund meets the requirements for an equity fund
An individual who is tax resident in Germany holds an ETF in a Swiss securities account. The fund meets the requirements for an equity fund under section 2(6) InvStG.
The relevant investment income before the partial exemption is EUR 10,000.
| Item | Amount |
|---|---|
| Investment income before partial exemption | EUR 10,000 |
| 30% equity fund exemption | EUR 3,000 tax-free |
| 70% taxable portion | EUR 7,000 |
The further German tax calculation is generally based on the taxable amount of EUR 7,000. The savings allowance (Sparer-Pauschbetrag), losses and other personal factors must then be considered separately.
Comparison
The same investment income can produce different taxable amounts
| Investment income | Fund type | Partial exemption | Taxable amount |
|---|---|---|---|
| EUR 10,000 | Fund with no qualifying exemption | 0% | EUR 10,000 |
| EUR 10,000 | Mixed fund | 15% | EUR 8,500 |
| EUR 10,000 | Equity fund | 30% | EUR 7,000 |
| EUR 10,000 | Real estate fund | 60% | EUR 4,000 |
| EUR 10,000 | Foreign real estate fund | 80% | EUR 2,000 |
Documents
Information needed to establish the partial exemption
Unit class
Exact ISIN, fund name and unit class.
Investment terms
The fund’s documented minimum investment allocations.
Factsheets
Additional information on the investment policy and portfolio composition.
Distributions
Gross distributions and income data for tax purposes.
Vorabpauschalen
Annual Vorabpauschalen recognised for each fund position.
Disposals
Acquisition costs, sale proceeds and the existing tax history.
Common Mistakes
Where partial exemptions are often applied incorrectly to Swiss accounts
ETF = equity fund
Exchange trading is confused with the fund’s tax classification.
Applying 30% automatically
The required equity investment allocation is not checked.
Copying the Swiss tax report
Swiss fund information is used as a German tax classification without review.
Exempting only distributions
The Vorabpauschale and disposal gains are overlooked.
Recognising losses in full
The effect of the partial exemption on negative income is ignored.
Confusing fund domicile with account location
A Swiss custodian bank is automatically equated with a Swiss fund.
Not checking the unit class
Documents relating to a different unit class are used.
Not retaining evidence
Fund documents for earlier tax years are no longer available when needed.
Frequently Asked Questions
Partial tax exemption for Swiss funds and ETFs
What is the partial exemption for an equity fund?
What is the partial exemption for a mixed fund?
When does a fund qualify as an equity fund for tax purposes?
When does a fund qualify as a mixed fund?
Does every equity ETF qualify for a 30% exemption?
Does the partial exemption also apply to the Vorabpauschale?
Does the partial exemption also apply on sale?
Does the partial exemption also affect losses?
What is the partial exemption for real estate funds?
Can the actual equity allocation be substantiated?
Is the Swiss tax report sufficient evidence?
Does it matter that my securities account is in Switzerland?
Further Reading
Funds and ETFs in Swiss securities accounts
Germany–Switzerland Tax Advice
Do you hold funds or ETFs in a Swiss securities account?
We review fund classification under German investment fund tax law, the applicable partial exemption, Swiss fund documentation, Vorabpauschalen and the tax treatment of distributions and disposal gains.
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