Germany · Investment Income
Anlage KAP for Foreign Brokerage Accounts and Brokers
Taxpayers resident in Germany who hold investments with a foreign broker or bank often have to report the income themselves in the German income-tax return. Unlike a German custodian bank, a foreign broker generally does not withhold German capital income tax. Dividends, interest, capital gains, funds and foreign withholding taxes therefore need to be prepared under German tax rules.
Basic Rule
No German Withholding Does Not Mean No German Tax
With a German bank, German income tax on many types of private investment income is collected directly through capital income tax withholding. With a foreign broker, this German withholding is often absent.
Taxable investment income that has not been subject to German capital income tax withholding must generally be reported in the German income-tax return. This is especially relevant for U.S. brokerage accounts and other foreign custodians.
The income must be determined under German tax law. The broker's annual statement is therefore source data, not automatically the German taxable amount.
Framework
Three Steps for a Foreign Brokerage Account
Classify the Income
Separate dividends, interest, stock gains, fund income and other investment income under German tax law.
Determine the German Tax Base
Calculate acquisition cost, sale proceeds, exchange rates, losses and, where relevant, investment-tax amounts under German rules.
Review Foreign Tax
Determine which foreign withholding tax is creditable in Germany and which excess amount may have to be reclaimed abroad.
Anlage KAP
Typical Income From a Foreign Brokerage Account
Anlage KAP is particularly relevant for investment income that has not been subject to German capital income tax withholding. With foreign brokerage accounts, the relevant figures must be reconstructed from broker records under German tax rules.
- dividends from German and foreign shares
- interest and other debt claims
- gains and losses from stock sales
- other capital gains under Section 20 EStG
- creditable foreign withholding tax
- saver's allowance and loss offset
Investment Funds
KAP-INV Can Also Be Relevant for Foreign-Custodied Funds
Investment funds and ETFs are subject in Germany to the Investment Tax Act. Where a German custodian bank is involved, distributions, advance lump-sum taxation, partial exemptions and disposal gains are generally already processed under German rules.
If fund units are instead held with a foreign broker, this German tax processing is often missing. In such cases, Anlage KAP-INV can become relevant for investment income.
Advance lump-sum taxation, partial exemptions, fund classification and the treatment of prior advance lump sums on a later sale can be particularly complex.
Foreign Withholding Tax
Not Every Foreign Tax Withheld Is Fully Creditable in Germany
Apply the Treaty First
A tax treaty can limit source-country withholding. For U.S. portfolio dividends paid to a German-resident private investor, the treaty rate is typically 15%.
Creditable Amount
German law limits the credit to the German tax attributable to the relevant income and takes treaty relief into account.
Excess Withholding
If more tax was withheld than permitted under the treaty, the excess is generally not simply creditable in Germany. A refund claim in the source country may be required.
Investment Funds
For fund income, the foreign-tax-credit limitation is based on the taxable amount remaining after any applicable partial exemption.
Currency Conversion
U.S. Dollar Values Must Be Converted Under German Tax Rules
For foreign-currency transactions, the gain shown by a U.S. broker in dollars cannot simply be copied into the German return. For German capital-gain purposes, acquisition cost and sale proceeds must each be determined in euros.
As a result, the German taxable gain can differ from the gain shown by the broker in U.S. dollars. Exchange-rate movements between purchase and sale affect the German calculation.
The same applies to dividends, interest and foreign withholding taxes: the relevant cash flows and tax amounts must be documented in euros for German tax purposes.
Records
Which Data Is Needed From the Foreign Brokerage Account
Dividends & Interest
Payment date, gross amount, withholding tax, currency and issuer or debtor.
Stock Sales
Acquisition date, quantity, historical cost, sale date, proceeds, fees and any relevant corporate actions.
ETFs & Funds
ISIN/ticker, fund domicile, fund classification, distributions, holding periods, purchases and sales, plus data relevant for advance lump-sum taxation.
Annual Documents
Annual statement, activity statement, transaction history, dividend report, withholding report and, where applicable, Form 1099 documents.
Typical Situations
Foreign Brokerage Accounts in Practice
U.S. Broker With Individual Shares
Dividends, U.S. withholding tax and German stock gains are prepared from the broker data for Anlage KAP.
U.S. Broker With ETFs
In addition to Anlage KAP, German investment-tax rules and therefore KAP-INV can become relevant.
U.S. Person Living in Germany
For German tax purposes, the U.S. brokerage account is a foreign account. The parallel U.S. taxation is coordinated separately.
Moving to Germany
Historical acquisition records should be retained in full. A general automatic German step-up for privately held securities should not be assumed.
Several Foreign Brokers
Income and losses must be combined across accounts according to German tax categories.
Excess Foreign Withholding
It is necessary to distinguish the amount creditable in Germany from any amount that must be reclaimed in the source country.
Related Guidance
Related Topics
Frequently Asked Questions
Anlage KAP for Foreign Brokerage Accounts
Do I have to report a U.S. brokerage account in Germany?
Is U.S. Form 1099 sufficient for the German tax return?
When do I need Anlage KAP-INV?
Can I credit the entire U.S. withholding tax in Germany?
How are stock gains in USD converted?
Can losses from a U.S. broker be used in Germany?
German Tax Advice
Holding an Account With a U.S. or Other Foreign Broker?
We prepare dividends, interest, stock sales and fund income for the German tax return, review Anlage KAP and KAP-INV, analyze foreign withholding taxes and, where U.S. tax is also relevant, coordinate the German and U.S. tax treatment.
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