Capital income and flat-rate withholding tax: use the favorable-rate test

Capital income such as interest and dividends is charged flatly with the 25 percent flat-rate withholding tax (plus solidarity surcharge and, where applicable, church tax). If your personal tax rate is below that, you can reclaim overpaid tax via the favorable-rate test. An unused saver's lump sum also brings money back.

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Your chances of getting your money back

Via the favorable-rate test in the tax return, it is checked whether your personal tax rate is lower than the 25% flat-rate withholding tax (§ 32d EStG). If it is, overwithheld tax is refunded.

Capital income remains tax-free up to the saver's lump sum (1,000 euros, 2,000 euros for joint assessment). If you did not file an exemption order and tax was withheld, you reclaim it via the return.

What you should do now

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1. Collect the tax certificate
Get from your bank/broker the annual tax certificate on withheld capital-gains tax.
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2. Apply for the favorable-rate test
Apply in the KAP annex for the favorable-rate test, the tax office automatically calculates the best variant for you.
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3. Check the saver's lump sum
Was tax withheld although the lump sum was not used up? Then you reclaim it.
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4. Offset losses
You can offset losses from capital investments against gains, that too reduces the tax.

How to spot the scam

You do not declare capital income at all although tax could be reclaimed.
An unused saver's lump sum lapses unused.
Losses are not offset.

Frequently asked questions

What is the favorable-rate test?

An application in the tax return (KAP annex) with which the tax office checks whether your personal income tax rate is lower than the 25% flat-rate withholding tax (§ 32d EStG). If it is, your capital income is taxed at the lower rate and overpaid tax is refunded.

How high is the saver's lump sum?

1,000 euros for singles and 2,000 euros for joint assessment. Up to this amount, capital income remains tax-free. With an exemption order at the bank, you avoid the tax deduction from the outset.

How do I reclaim overpaid flat-rate withholding tax?

Via the KAP annex in the tax return, with the bank's annual tax certificate. There you can apply for the favorable-rate test, make up an unused lump sum and have losses offset.

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General information for self-help, not legal advice (RDG). In case of a high loss or uncertainty: contact a consumer advice center or a lawyer.