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What is the advance lump sum?

The so-called advance lump sum ensures that a certain minimum taxation takes place at the investor level - even in cases where a fund makes no or insufficient distributions. The amount of the advance lump sum always refers to the previous year. When the shares are actually sold, the advance lump sums taxed up to that point are deducted from the proceeds of the sale (proceeds of sale minus acquisition data minus advance lump sum).

This means that a capital gain is reduced (and thus the tax burden). In the case of a capital loss, the advance lump sum already calculated increases your capital loss. Double taxation is therefore excluded.

The advance lump sum has been levied and taxed since the beginning of 2019.

What is the advance lump sum?


Which funds are affected by the advance flat rate?

In principle, all domestic and foreign investment funds (including ETFs) can be affected by the advance lump sum.

For distributing funds, any distribution made is taken into account when calculating the advance lump sum. If the distribution is sufficiently high, no advance lump sum is incurred. It can therefore be assumed that the advance lump sum mainly affects accumulating funds.

Which funds are affected by the advance flat rate?


What is the advance flat rate?

The advance lump sum is a special tax regulation for income from accumulating or partially accumulating funds. Since 2019, it has been levied annually and represents an advance taxation of future expected increases in value.

Important: The advance lump sum is deducted again from the actual sales profit when the fund shares are sold to avoid double taxation.

How is the advance lump sum calculated?

The advance lump sum is not based on actual profits but is calculated using the following formula:

Advance lump sum = 70% of the base interest rate × value of the fund share at the beginning of the year

  • The base interest rate is set annually by the Deutsche Bundesbank on 02.01.
  • The advance lump sum is limited to the so-called basic income. This corresponds to the difference between the first and last redemption price in the year, plus any distributions.
  • If there is no redemption price, the stock market or market price is used.

The calculated advance lump sum is then subject to withholding tax of 25% – plus solidarity surcharge and, if applicable, church tax.

When is the advance lump sum considered received?

The advance lump sum is not recorded immediately but always on the first working day of the following year as income. This is regulated by § 18 para. 3 InvStG.

Advance lump sum for 2025 (BMF letter dated 10.01.2025)
  • Base interest rate (02.01.2025): 2,53%
  • 70% of this: 1,771%
  • Fictitious receipt: 02.01.2026

What is the advance flat rate?

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Line 4 Distributions from equity funds

This page provides a summary of the information from the sections "Summary of amounts according to tax statement" and "Individual entry of investment funds".

Credited foreign taxes (line 40 of Form KAP)

Enter the credited foreign taxes that apply to fund income and have already been credited against German tax as part of investment taxation. This includes, for example, withholding taxes on foreign dividends or interest income in the fund assets.

The amount will be transferred to line 40 of the KAP form.

Example: A fund holds US shares and distributes income to you. In the US, 15% withholding tax is deducted, so on a distribution of 1.000 Euro, 150 Euro withholding tax is incurred. Of this, 100 Euro was credited against your German tax. Enter 100 Euro here.

Сreditable foreign taxes (line 41 of Form KAP)

Enter the creditable foreign taxes applicable to fund income that would generally be creditable against German income tax. The amount may be higher than the actual credited tax if, for example, statutory maximum amounts under the Investment Tax Act (§ 7 para. 1 InvStG) limit the credit.

The value is transferred to line 41 of Form KAP.

Example: A total of 300 Euro foreign withholding tax was deducted from fund income, but only 250 Euro were creditable. Enter 300 Euro here.

Notional foreign taxes (line 42 of Form KAP)

Enter any notional foreign withholding taxes that are considered for tax credit purposes under certain double taxation agreements (DTAs) or the Investment Tax Act, even though no tax was actually withheld abroad.

The amount is entered in line 42 of Form KAP.

Example: A DTA allows a notional withholding tax of 10% to be credited for certain foreign income from a fund, even though no actual tax was withheld. For income of 1.000 Euro, this results in a notional tax of 100 Euro. Enter 100 Euro here.

Should foreign tax deduction amounts be taken into account?

Select "yes" if foreign tax deductions have already been credited on the income from investment funds.

This concerns withholding taxes levied on fund income abroad, which can be taken into account in Germany under the Investment Tax Act.

The foreign taxes can be credited against German tax. However, maximum amount regulations and possible credit limits under an existing double taxation agreement (DTA) must be observed. Only the amounts actually credited should be entered here.