Different capital gains are no longer taxed with different percentages, as is the case with capital gains tax. Instead, dividends, interest and price gains on shares are taxed at a flat rate of 25 percent withholding tax (plus solidarity surcharge and church tax). This applies to all income that is above the tax exemption, the so-called saver lump sum, of 801 euros per person or 1,602 euros for a married couple. However, the tax is generally levied on all investment income; the saver lump sum can then be claimed later by means of an exemption order or a non-assessment certificate.
For people with an income tax rate of over 25 percent, the withholding tax means a corresponding tax break. You no longer pay capital gains tax at your personal tax rate, which can be up to 45 percent, but only the 25 percent withholding tax plus solidarity surcharge and church tax, a maximum of around 28 percent in total. The following formulas illustrate how the total taxes are made up:
Formulas for calculating solos and church tax
Formula for calculating the solidarity surcharge:
- 25 × 5.5 = 1.375%
- Formula for calculating the church
- Tax flat tax = investment income ÷ (4 + hundredths of the church tax rate)
- Church tax = flat tax × church tax rate
The church tax in Bavaria and Baden-Württemberg is 8 percent, in all other federal states 9 percent, calculated as a percentage of the amount of the flat tax. With 8 percent, there is a surcharge of 1.96 percent, with 9 percent a surcharge of 2.2 percent. Accordingly, income without church tax is taxed at 26.38 percent and plus church tax at 27.99 percent and 27.82 percent, respectively.
You can deduct church tax expenses as special expenses, so that minus the possible special expenses deduction, the calculation base is 24.45 percent with 9 percent church tax or 24.51 percent with 8 percent church tax.
If you are subject to a tax rate lower than 25 percent, the withholding tax does not represent any additional tax burden. You can have the difference reimbursed through your tax return. You will then only have to pay the normal tax rate instead of the 25 percent. As with capital gains tax, the final withholding tax is withheld and sent directly to the tax office, make use of the tax return calculator there.
You have a savings book with a credit balance of 10,000 euros and 100 euros in interest. You live in Rhineland-Palatinate and therefore have to pay 9 percent church tax. Your investment income of 100 euros in interest must be taxed.
Using the above formula, the amount of the withholding tax can now be calculated as follows:
- 100 euros ÷ (4 + 0.09) = 24.44 euros withholding tax
- 44 euros withholding tax × 0.09 church tax rate = 2.20 euros church tax
A 5.5 percent solidarity surcharge is also deducted from the flat tax of 24.44 euros, so that the solidarity surcharge is 1.34 euros. If these amounts are now combined, the result is an amount of 27.98 euros, which includes the flat tax, church tax and solidarity surcharge. This amount would be correspondingly lower.
With the capital gains tax, interest was taxed at a tax rate of 30 percent until 2009, so that you had to pay 30 euros capital gains tax for 100 euros interest – without solos and church tax.
Why was the withholding tax introduced?
The introduction of the final withholding tax or the replacement of the capital gains tax should create uniformity. Previously, there was both taxable and non-taxable investment income, as well as different tax rates for different types of investment income. In addition, this individual investment income had to be listed in individual sections in the tax return. This no longer has to be done since 2009. With this simplification and the relatively low flat tax, the legislature also wanted to ensure that no more capital is sent abroad.