Withholdding tax (Vorabpauschale) Calculator for Germany
In Germany, you pay an upfront tax on your ETFs and investment funds called the Vorabpauschale. Each year, this payment reduces the value of your assets, thus limiting the build-up of your funds.Updated on 2 February 2026
In Germany, you pay an upfront tax on your ETFs and investment funds called the Vorabpauschale. Each year, this payment reduces the value of your assets, thus limiting the build-up of your funds.
Let's calculator your Vorabpauschale
Results
Net gain 5.000 € | Withholding tax 186 € | Effective Tax Rate 0,41 % |
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While the normal tax rate for 2026.0 is 0,41 %, it is being reduced because your return was less than the presumed rate of return.
Why is the Vorabpauschale Higher in 2026?
The Vorabpauschale depends on the German Base Interest Rate (Basiszins), which is set equal to the 15-year bond rate at the end of the previous year. This bond rate has, in recent years, been increasing, and jumped to 2,53 % at the end of 2024. This rate becomes the base rate for 2025 and is used for the tax rate in 2026. Indeed: The bond rate at the end of 2024 is the basis for the tax in 2026 and so on. Here is how the effective burden for a standard equity ETF (30 % partial exemption) has shifted since 2022:
Tax Year | Base Interest Rate of the previous year, based on the 15-year bond rate | Tax Rate (Standard Equity ETF) = 0,7 x 0,7 x 26,375 % x Base Interest Rate with a minimum of 0 % |
|---|---|---|
2023 | -0,05 % | 0,00 % |
2024 | 2,55 % | 0,33 % |
2025 | 2,29 % | 0,30 % |
2026 | 2,53 % | 0,33 % |
2027 | 3,20 % | 0,41 % |
What is the Vorabpauschale for 2027?
The withholding tax for 2027 is already known, because it is based on the 15-year bond rate at the end of 2025. This rate was announced by the Ministry of Finance as 3,2 %. For the standard over 50 % stocks ETF, the withholding tax rate therefore can be calculated as 0,41 %.
How is the Vorabpauschale Calculated?
The withholding tax is calculated as follows:
70 % * Taxable Share in % for Type of Investment * Capital Gains Tax Rate * Base Interest Rate with a Minimum of 0 %. Example for 2027 for a standard equity ETF: 70 % x 70 % x 26,375 % x 3,2 % = 0,41 %
Note that the taxable share depends on the nature of the ETF or fund. For the standard equity fund, the taxable share is 70 %:
Asset type | Taxable share (%) |
|---|---|
ETF or Fund with > 50 % stocks (Aktienfonds) | 70,00 % |
Between 25-50 % stocks (Mischfonds) | 85,00 % |
Under 25 % stocks | 100,00 % |
Real estate fund (Immobilienfonds) | 40,00 % |
Foreign real estate fund (Ausland Immobilienfonds) | 20,00 % |
When you sell your assets, you pay the capital gains tax rate of 26,375 % multiplied by the taxable share. Your bank automatically subtracts any Vorabpauschale you paid in previous years from your tax. This prevents double taxation.
BLOG_ARTICLE_CTA So while the withholding tax is deductible, it is still costly for you, as it pulls the tax forward, meaning you benefit less from compounding. This compounding should not be underestimated. The rule of 72 shows that with a return of 7,2 %, you double your money every 10 years, so in 30 years, your money can be 8-fold. Hence, paying up front 1 € costs you 8 € in forgone returns. If we consider the tax you paid at the end after 30 years, your net gain is about 6,5 €. Net gain of paying tax after 30 years: 8 € x (1 - 26,375 % x 0,7) = 6,52 € per € of Vorabpauschale paid. We therefore stress investing with the best tax efficiency and high expected returns at low cost—at Pensionfriend, we select ETFs that outperform their respective indices after costs.
How Can I Reduce Vorabpauschale Tax Legally? The Pensionfriend Way
Indeed, the simplest way to avoid paying the Vorabpauschale is to invest in a Private Pension Plan (PPP). You don’t pay any withholding tax, so your assets accumulate tax-free. When you sell or buy stocks or bonds to optimize your allocation, you don't pay any tax in a PPP. Moreover, 50 % of the capital gains are tax-free if you take them out after the age of 62, and if you held your plan for over 12 years. This is why we focus on the PPP solution at Pensionfriend, even though we can also offer other products. For small investments, you can also avoid the Vorabpauschale if you just hold a small amount. Your tax-free threshold is 1.000 € per year for an individual and 2.000 € for a couple. Keep in mind that you also need that threshold for your normal savings accounts. For example, keeping a small amount, say 10.000 €, in a broker account that returns 6-7 % should help you fully exploit that tax-free amount if you have another 10.000 € in your savings accounts earning 2-3 %. So one earns you about 600-700 € and the other 200-300 €, so you just about reach your tax-free limit as an individual. What you do not want to do is let your 10.000 € in an ETF account grow to, say, 100.000 €, only to realize you want to switch. At that time, it will be costly to change, as you need to sell your assets and pay the full capital gains tax 26,375 % over 70 % on your stock ETFs. To sum up, here is why we recommend a PPP as the best solution for larger investments:
Inside a Pensionfriend Private Pension Plan (PPP), the Vorabpauschale does not exist. Your capital stays invested without annual tax leakage and compounds until retirement. In addition, you benefit from a 15% partial exemption on all fund types at any time and a 50 % tax reduction on gains you take out after age 62.
Footnotes
The German Federal Ministry of Finance officially set the 2026 Basiszins at 3.20%. This is a 26,5% increase from the 2025 rate (2,53 %), making this the most expensive year for ETF investors since 2018. The German Federal Bank (Deutsche Bundesbank) is the one that calculates 15-year yield data used for the annual interest base.
The legal framework governing the "Vorabpauschale" calculation and the deduction of previous tax payments upon sale is the Investment Tax Act (§ 18 & § 19 InvStG).
