Germany–U.S. · German Perspective
Stock Sales and Capital Gains Between Germany and the United States
How are gains from the sale of U.S. stocks taxed when the investor is resident in Germany? From the German perspective, the key issues are Section 20 EStG, Article 13 of the Germany–U.S. tax treaty, gain calculation in euros, historical acquisition cost and the proper preparation of U.S. brokerage data.
German Taxation
Gains From U.S. Stocks Are Generally Taxable in Germany
An individual subject to unlimited German income taxation generally has to report gains from the sale of U.S. stocks in Germany. Under Section 20(2) EStG, gains from the disposal of shares in corporations generally constitute investment income.
For private investments, the separate German tax rate of 25% generally applies, plus solidarity surcharge and, where applicable, church tax.
The fact that the stock was issued by a U.S. corporation or sold through a U.S. broker does not by itself make the gain taxable in the United States.
Framework
Three Questions Determine the German Tax Result
Where Is the Investor Resident?
If the investor is resident and fully taxable in Germany, foreign capital gains generally form part of German worldwide income.
What Is Being Sold?
Individual stocks, ETFs, options, RSUs and substantial shareholdings can be subject to different German tax rules.
What Is the German Taxable Gain?
The German taxable gain is determined under German rules and in euros. It can differ from the gain reported by the U.S. broker.
Article 13 Germany–U.S. Tax Treaty
Gains From Ordinary Portfolio Shares Are Typically Allocated to the Residence State
The Germany–U.S. tax treaty contains specific allocation rules for capital gains. For an ordinary sale of portfolio shares by a non-U.S. investor resident in Germany, the taxing right typically lies with Germany.
Special cases must be distinguished, including real-estate-related interests, assets attributable to a permanent establishment and cases involving U.S. persons.
- ordinary portfolio shares: typically taxable in Germany
- no general U.S. withholding tax on stock-sale proceeds
- real-estate-related interests can trigger special rules
- permanent-establishment assets require separate analysis
- U.S. persons remain subject to U.S. worldwide taxation
- treaty and domestic law must be analyzed together
Section 20(4) EStG
The German Capital Gain Is Calculated in Euros
Sale Proceeds
The starting point is the proceeds from the disposal, reduced by expenses directly connected with the sale.
Acquisition Cost
The tax-relevant acquisition cost of the shares sold is then deducted.
Separate Euro Conversion
For transactions carried out in a foreign currency, the sale proceeds at the time of disposal and the acquisition cost at the time of purchase are each converted separately into euros.
Difference From U.S. Broker Gain
A USD gain reported by the broker is therefore not automatically the German taxable gain. Exchange-rate movements can materially change the result.
Example
Same Stock Price, Different Taxable Gain Because of Exchange Rates
A stock is purchased for USD 10,000 and later sold for USD 12,000. The U.S. broker reports a gain of USD 2,000.
For German tax purposes, however, the USD 10,000 acquisition cost is converted into euros at the exchange rate applicable on the acquisition date, while the USD 12,000 sale proceeds are converted at the rate applicable on the sale date.
The German taxable gain can therefore be materially higher or lower than a simple euro conversion of the USD 2,000 broker gain.
U.S. Broker
A U.S. Brokerage Account Usually Does Not Apply German Tax Logic
A U.S. broker calculates cost basis and capital gains under U.S. rules. It generally does not withhold German capital income tax and does not apply German currency-conversion or loss-offset rules.
The transaction data therefore have to be prepared under German rules for the German income-tax return.
- retain complete purchase and sale history
- document tax lots and historical acquisition cost
- account for corporate actions
- track stock splits and reinvestments
- determine euro values for each acquisition and sale
- apply German stock-loss rules
- report through Anlage KAP
Losses
Stock Losses Are Subject to Special German Offset Rules
Stock Losses
Losses from the sale of shares are generally subject to specific German loss-offset rules and can generally be offset only against gains from stock disposals.
Foreign Broker
A U.S. broker does not maintain a German tax loss-offset pool. Gains and losses therefore have to be combined correctly through the German tax return.
Multiple Brokerage Accounts
Where several German and foreign accounts exist, correct consolidation of gains and losses can be especially important.
Other Securities
ETFs, options and other investments can be subject to different German loss-offset or investment-tax rules and should not automatically be treated like individual stocks.
Moving From the U.S. to Germany
Germany Does Not Automatically Step Up Cost Basis to Market Value on Arrival
Anyone moving to Germany with an existing U.S. brokerage account should retain the historical acquisition cost of the securities. For a later German gain calculation, the market value on the date of arrival is not automatically treated as a new tax basis.
This means appreciation that arose before the move can potentially affect the later German taxable gain. Whether and to what extent Germany may tax the gain must be determined from the facts and the applicable treaty rules.
Before moving, it is therefore useful to review cost basis, unrealized gains and planned disposals.
U.S. Person Resident in Germany
For U.S. Taxpayers, U.S. Taxation Continues in Parallel
U.S. Worldwide Taxation
U.S. citizens and other U.S. taxpayers generally remain subject to U.S. taxation on worldwide capital gains.
German Taxation
If the taxpayer is resident in Germany, the same capital gain can also be taxable in Germany.
Foreign Tax Credits
Treaty rules, sourcing and foreign tax credits must be coordinated to reduce double taxation appropriately.
Basis Differences
U.S. and German cost basis can differ, which can cause the taxable gain to differ between the two countries as well.
Related Guidance
Related Topics
Frequently Asked Questions
Stock Sales & Capital Gains Germany–U.S.
Where are gains from U.S. stocks taxed if I live in Germany?
How is the German taxable gain calculated?
Can I simply use the capital gain reported by my U.S. broker?
Does the United States withhold tax when I sell U.S. stocks?
What happens to stock losses?
What happens when I move from the United States to Germany?
Germany–U.S. Tax Advice
Selling U.S. Stocks While Resident in Germany?
We review treaty allocation, German gain calculation, cost basis, euro conversion, loss offsets and the preparation of U.S. brokerage data for the German tax return.
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