Taxes stated below should be included in your annual return.

In the section below, we’ll look into the taxes that apply to accumulating ETF investments.**Capital gains tax**

All investment income is subject to tax in Germany. The capital gain tax rate is 25% plus the solidarity surcharge of 5.5% totaling 26.38% (25%+25%*5.5%) and if applicable, church tax. Church tax depends on the investor’s residence. In many states, the tax is 9% (28.6% = 26.38% + 25%*9%); however, in Bavaria and Baden-Württemberg it is 8% (28.4%).

There’s a tax-free allowance for capital gains, also known as Sparerpauschbetrag. From 1 January 2023, for a single person, the amount is €1000 per year. For a married couple, the amount is doubled, i.e., €2000 per year. **Tax on the advance lump sum**

The Vorabpauschale (advanced lump sum) is an upfront tax payment for potential profit generated by accumulating ETF.

To calculate the taxable amount (advances lump sum), use 70% of the base interest rate and apply it to the portfolio value at the beginning of the month.

The base interest rate (https://www.bundesfinanzministerium.de/Web/DE/Home/home.html) is published on an annual basis by the Federal Ministry of Finance for the past calendar year. The taxes will be paid either on the advance lump sum or the actual profit (unrealized gains), depending on which one is lower. You can find an example for calculating the upfront tax below. Please keep in mind that the tax-free allowance isn’t included in our example.

When you sell the ETF and make a profit (realized profit), the upfront tax previously paid is subtracted from the total taxes you owe on your profit.

Advance lump sum

*Portfolio value at the beginning of the year (01.01.2023): **€150 000*

*The base interest rate for the year 2023: **2.55%*

*Advance lump sum = **€150 000 * 2.55% * 70%*

*Advance lump sum = **€1155*

Unrealized gain | scenario 1

*Portfolio value at the beginning of the year (01.01.2023): **€150 000*

*Portfolio value at the end of the year (31.12.2023): **€155 500*

*Unrealized gain =** €155 500 - €150 000*

*Unrealized gain = **€5500*

Determining the taxable amount | Scenario 1

*The amount taxed is the lowest amount between the advance lump sum and the unrealized profit. *

*Advance lump sum (€1155.50) < Unrealized profit (€5500) *

*Therefore, the taxable amount will be the advance lump sum of €1155*

Calculating the tax

*Capital gains tax: **25%*

*Solidarity surcharge tax: **5.5%*

*Total tax: **25% + (25% * 5.5%)*

*Tax amount = **€1155.50 * 26.38%*

*Tax amount =** €304.63*

Unrealized profit | Scenario 2

*Portfolio value at the beginning of the year (01.01.2023): **€150 000*

*Portfolio value at the end of the year (31.12.2023): **€151 000*

*Unrealized gain =** €151 000 - €150 000*

*Unrealized gain = **€1000*

Determining the taxable amount | Scenario 2

*The amount taxed is the lowest amount between the advance lump sum and the unrealized profit. *

*Advance lump sum (€1155.50) > Unrealized gain (€1000) *

*Therefore, the taxable amount will be the unrealized gain of €1000*

Calculating the tax

*Capital gains tax: **25%*

*Solidarity surcharge tax: **5.5%*

*Total tax: **25% + (25% * 5.5%)*

*Tax amount = **€1000 * 26.38%*

*Tax amount =** €263.75*

*Upon actual sale, the taxed amount will be deducted from the capital gains amount. *

**The first year of investment**

In the first year after purchasing ETFs, the upfront lump sum will be adjusted by reducing it by one-twelfth for each complete month that has passed before the acquisition date.. For example:

*Portfolio value at the beginning of the year (01.01.2023): **€0*

*ETF Purchase on June 15th, 2023:** €150 000 *

*Portfolio value at the end of the year (31.12.2023): **€151 000*

*Advanced lump sum =** €150 000 * 2.55% * 70% * (12-5*)/12*

*= €1561.88*

*Unrealized gain =** €152 000 - €150 000*

* = €2000*

*Advance lump sum (€1561.88) < Unrealized gain (€2000) *

*Therefore, the taxable amount will be the advanced lump sum of €1561.88*

** The figure represents the full number of months before the purchase Mintos does not provide tax advice. For specifics on local tax regulations, we recommend you obtain advice from the Tax Authorities or independent advice from tax consultants. *