Abgeltungsteuer

The Abgeltungsteuer (German, from Abgeltung 'settlement', 'discharge' + Steuer 'tax') is a flat tax on private income from capital. It is used in Germany, Austria, and Luxembourg. The Abgeltungsteuer (German, from Abgeltung 'settlement', 'discharge' + Steuer 'tax') is a flat tax on private income from capital. It is used in Germany, Austria, and Luxembourg. In Germany, the Abgeltungsteuer was introduced through the German Corporate Tax Reform Act of 2008  that passed the German Parliament on 14 August 2007. The Abgeltungsteuer became effective on 1 January 2009. In 2009 the Abgeltungsteuer replaced the half revenue procedure  that had been effective since 2001. The German Income Tax Act  had a procedure whereby taxable income was halved for purposes of dividend taxation. Fifty percent of income, as defined in article 3 number 40 of the Tax Act as amended in 2008, was exempt from income tax. Dividends and taxable capital gains from the sale of investments were taxed (if a certain exemption limit was exceeded) at only half the rate of income tax and solidarity surcharge tax . Profits from the sale of equity investments were not taxable if they were held for over a year. The half revenue procedure was moot as of 1 January 2009 with the passage of the new Abgeltungsteuer (Article 32 of the German Income Tax Act). The taxation at the level of a shareholder (shareholders or partners) depends on whether the shareholder is an individual or a corporation: The Abgeltungsteuer is levied as a withholding tax. Private investor’s tax liability is settled. The already taxed capital gains are no longer recorded in the annual income tax return.Instead of taxing with the personal tax rate of taxpayers, their income regardless of their height is taxed with the flat tax rate of 25%. The legal basis for this was amended in the Unternehmensteuerreformgesetz of 2008 in Art. 32 d of the German Income Tax Act.The withholding tax rate according to Art. 43 a Para. 1 German Income Tax Act is 25% plus solidarity surcharge of 5.5% on the final withholding tax and possible church tax (8 or 9% of the flat tax). This makes a total of Abgeltungsteuer of 26.375% church tax excluded.The surplus income from capital assets cannot be shortened by the overall deductions through lump sum or actual expenses. In their place, the saver's allowance in the amount of 801 € will be used as deduction (Art. 20 Para. 9 German Income Tax Act). However actually there are several decisions in court to rule on that restricted deduction possibility.