Open an investment account (Depot)
Once your emergency fund is in place, a securities account (Depot) is the gateway to investing in funds, ETFs, shares and bonds. You can open one at a traditional bank or, usually more cheaply, at an online broker. Investment income in Germany is taxed under a flat capital-gains regime: 25 percent Abgeltungssteuer plus the 5.5 percent solidarity surcharge (and church tax if applicable), giving an effective rate of about 26.375 percent. The good news is the annual tax-free allowance, the Sparerpauschbetrag, which is 1,000 euros per person (2,000 euros for jointly assessed couples) for both 2025 and 2026, and you unlock it by filing a simple exemption order (Freistellungsauftrag) with your bank or broker.
What a Depot is and where to open one
A Depot (Wertpapierdepot) is an account that holds securities, the way a current account holds cash. You use it to buy and sell ETFs, mutual funds, individual shares and bonds, and to receive dividends and interest. Opening one is straightforward and usually free; what differs is the cost of using it.
Traditional banks offer Depots but often charge higher account and trading fees, while online brokers (Neobroker and direct banks) typically offer free or very low-cost accounts and cheap ETF savings plans (Sparplaene). For most long-term investors a low-cost broker with a good range of ETF savings plans is the sensible default. Identity verification for German accounts is commonly done by video-ident or PostIdent, and you will need a German tax ID and usually a German bank account.
How investment income is taxed
Germany taxes capital income (interest, dividends and realised gains) at a flat rate rather than at your personal income-tax rate. The Abgeltungssteuer is 25 percent, plus the solidarity surcharge of 5.5 percent of that tax, which brings the effective rate to about 26.375 percent. If you are a registered member of a church, church tax (8 or 9 percent of the capital-gains tax depending on the federal state) is added on top.
For accounts held at a German bank or broker, this tax is normally withheld automatically at source and forwarded to the tax office, so you do not have to declare each trade yourself. Note this means the convenience cuts both ways: tax is taken automatically unless you have told the bank to apply your allowance.
The Sparerpauschbetrag and Freistellungsauftrag
Every taxpayer has an annual tax-free allowance for capital income, the Sparerpauschbetrag. For both 2025 and 2026 it is 1,000 euros per person, or 2,000 euros for a married couple assessed jointly. Capital income up to that amount is free of Abgeltungssteuer.
The allowance is not applied automatically. To use it, you submit a Freistellungsauftrag (exemption order) to your bank or broker, telling them how much of your allowance to apply to that account. Up to the amount you specify, the bank then pays out interest, dividends and gains without withholding tax. If you hold several accounts, you can split the 1,000 euros across them, but the total across all institutions must not exceed your allowance. If you forget to file one, the bank withholds tax on everything, and you have to reclaim it later through your tax return.
Expat-specific pitfalls
Tax residency drives everything. If you are tax-resident in Germany, your worldwide investment income is generally taxable here, including gains in brokerage accounts you kept abroad. Foreign brokers usually do not withhold German tax for you, so those gains must be declared in your German tax return, and you may need to deal with foreign withholding tax and double-taxation treaties. Keeping investments in a German Depot simplifies the tax mechanics considerably.
Two more traps: US citizens face heavy reporting obligations (FATCA/PFIC rules) that make many European funds impractical, so get specialist advice before buying ETFs. And remember the Freistellungsauftrag only works at German institutions, so if your accounts are abroad you will reclaim the allowance via your annual return instead.
- 1Confirm your emergency fund is in place before investing in a Depot.
- 2Choose between a bank and an online broker, comparing account fees, trading costs and ETF savings-plan options.
- 3Open the Depot using your German tax ID and identity verification (video-ident or PostIdent).
- 4File a Freistellungsauftrag so capital income up to 1,000 euros (2,000 for couples) is paid out tax-free.
- 5If you hold accounts abroad, note that gains must be declared in your German tax return.
- 6Invest according to a plan (for many, broad low-cost index funds via a savings plan) and review periodically.
A tecis advisor can help you decide how a securities account fits into your overall plan and explain how the capital-gains tax and the Sparerpauschbetrag affect your returns. They can talk you through low-cost, broadly diversified options such as index funds (Indexfonds) suited to long-term goals.
- Verbraucherzentrale - Freistellungsauftrag and Sparerpauschbetrag
- BaFin - investing and securities (consumer information)
- PwC Tax Summaries - Germany, income determination (capital income)
- Make it in Germany - banking and finances
General information for expats in Germany, not individual advice. Rules and figures change; verify against the official sources above and your own situation.