Due to the poor pension insurance structure in Germany, people are always looking for a way to secure themselves in retirement. In addition to their own savings, investors like to steer into a security that is promising and also brings a little relief in old age. An investment in different financial areas can help to make up some percentages in the year. This can be used as a capital investment so that investors will make purchases or simply enjoy the last years of life safely in old age. Shares are always seen as a special investment that bring good long-term returns. However, investors must bear in mind that any income from shares is subject to additional tax. The tax office must be informed about the current income, as the regulation in Germany states. What is the share tax?

What share tax must be paid and how are share profits taxed?

Even if shares do not directly bring profits, these must still be taxed immediately when they occur. Stock gains must be taxed in Germany according to German law. Stock gains have been taxed under the flat rate withholding tax since 2009. For shares purchased before December 31, 2008, a taxable capital gain arose if there was a period of less than one year between the purchase and sale of a share.

This means that if there was a period of more than one year, the income received was tax-free. Of course, however, the country must see that it also collects money from the traders' earnings in order to finance Germany. Thus, the regulation was changed at the beginning of 2009. Namely, the final withholding tax was introduced, which is to tax stock profits at a flat rate. The tax amounts to a full 25 percent. In addition, the solidarity surcharge of 5.5 percent is added. Depending on the personal case, church tax must also be added. The trader who is able to record share gains for himself must therefore include an interest rate of 26.375 percent without adding the church tax.

Advantages and disadvantages of the share tax

In terms of the flat rate tax, it gives especially richer people an advantage when they have to pay tax on their stock gains. The flat rate of taxation of 25 percent taxation enables shareholders with a medium or high income to save money. The maximum rates for the income bracket are currently 45 percent. If there is a lower income, the right to choose is available. One has to pay a lower interest rate on the income due to the income level. Thus, it remains free whether the stock gains want to be declared or not. Low earners, who do not make high profits with shares, have no disadvantage due to the taxation. In order to strengthen their own salary, some investors buy shares. However, many people have turned away from shares since the new regulation with taxation exists. Shares bought before 2009 are still tax-free and do not have to be taxed.

Paying the final withholding tax automatically

A distinction must be made as to which income from shares is taxed. Basically, it should be noted that no costs have to be deducted for a gain on shares that have been bought and sold. Mostly, so-called transaction costs are due with the Exness deposit method, which arise when buying a share. These are collected by the brokers and also the bank. Even the final withholding tax is deducted directly by the bank and the broker from the profits and transferred to the tax office. Thus, the owners of shares do not have to take into account the shares tax in the annual income declaration.

However, this is not the case if the church tax is not automatically deducted by the bank. In this case, a reporting obligation is active, which requires that the church tax must be paid in the income tax return. In this case, it is necessary to inform the bank to which denomination the customer belongs. Information about the investment income in the tax return ultimately pays off if the tax rate is below 25 percent. The investor benefits from the tax savings.