How much is exempt depends on how the fund is classified for tax. Qualifying equity funds generally get 30%, qualifying mixed funds get 15% for private investors. Keep in mind what this is about: the taxable part of your investment income. It isn't a promise about returns, and it doesn't cut your tax bill by 30% in every situation.
The short answer
- Qualifying equity funds (Aktienfonds): 30% of the relevant fund income is exempt from German income tax.
- Qualifying mixed funds (Mischfonds): 15% is exempt for private investors.
- The fund has to meet the conditions in Germany's Investment Tax Act (Investmentsteuergesetz, or InvStG).
- The exemption can apply to fund distributions, the Vorabpauschale and gains when you sell fund units.
- It does not mean 30% of the money you invested is tax-free, and it doesn't mean you pay 30% less tax in every case.
Why part of your gain is left out
Teilfreistellung literally means partial tax exemption. Germany taxes certain income inside investment funds and also taxes investors on their fund income. The partial exemption is part of the system that takes account of the tax already paid at fund level, so the same money isn't taxed too many times.
For a qualifying equity ETF with a €1,000 gain, the basic idea looks like this:
| Portion of the gain | Amount |
|---|---|
| Gain before the partial exemption | €1,000 |
| Exempt under Teilfreistellung (30%) | €300 |
| Remaining amount before other allowances and adjustments | €700 |
Your personal capital-income allowance can reduce the remaining taxable amount even further.
Here's the bit that catches people out: the 30% comes off the income before the tax is calculated. It isn't a 30-point cut in the tax rate.
Try it with imaginary numbers
Follow a gain through the German tax rules
- Your gainWhat you sold for, minus what you paid€0
- Tax-free partTeilfreistellung: 30% for this kind of fund€0
- Your allowanceSparer-Pauschbetrag, used up to what's left€0
- What actually gets taxedOnly this part€0
- Tax25%, plus a 5.5% surcharge on that tax€0
- You keepOverall that's a tax of about 0% on your gain€0
2026 rules for a private investor in Germany. No church tax, no losses and no earlier Vorabpauschale. The order of the steps is the legal one: tax-free part first, then the allowance. Try a sale, a payout or the Vorabpauschale
Let's run the numbers with Maya
Maya sells an equity ETF with a €3,000 gain
Maya is a hypothetical investor. She lives in Germany and holds a qualifying equity ETF in an ordinary investment account. She sells some units and makes an illustrative €3,000 taxable gain before Teilfreistellung.
For this example, we assume:
- She's a German tax resident and a private investor.
- The fund qualifies for the 30% equity-fund exemption.
- She still has her full €1,000 Sparer-Pauschbetrag for that tax year.
- She has no relevant losses to offset, no church tax, no foreign tax credits and no earlier Vorabpauschale amounts that would change this sale.
- We leave out other transaction-specific adjustments.
| Step | Calculation | Result |
|---|---|---|
| Gain from sale | €3,000.00 | |
| Equity-fund exemption | €3,000 × 30% | −€900.00 |
| Amount after Teilfreistellung | €3,000 − €900 | €2,100.00 |
| Unused savings allowance | €2,100 − €1,000 | −€1,000.00 |
| Amount subject to capital income tax | €1,100.00 | |
| Capital income tax | €1,100 × 25% | €275.00 |
| Solidarity surcharge | €275 × 5.5% | €15.13 |
| Illustrative total tax | €290.13 |
Illustrative gain after these taxes: €2,709.87. That's the gain minus the simplified tax estimate, not the full value of Maya's sale.
Without the allowance, the tax would be higher. And if Maya had already used her allowance on interest or other investment income, she couldn't use the same €1,000 again.
Want to try your own numbers? Use the Investment Tax Calculator.
Want the nerdy details?The rules, the exact numbers and the edge cases. Open it whenever you're curious.- Does your ETF qualify?
- Does Teilfreistellung apply to accumulating ETFs?
- And if your ETF loses value?
- How it fits with your €1,000 allowance
Does your ETF qualify?
It depends on the fund's legal investment conditions. The word "ETF" in the name doesn't settle it.
Equity funds (Aktienfonds)
Under § 2(6) InvStG, an equity fund generally has to be required by its investment conditions to invest continuously more than 50% of its active assets in qualifying equity participations (Kapitalbeteiligungen).
For ordinary private investors, qualifying equity-fund income generally receives the 30% partial exemption under § 20(1) InvStG.
Many broad, equity-focused UCITS ETFs fall into this group, but check the particular fund's tax classification. Not every fund qualifies.
Mixed funds (Mischfonds)
Under § 2(7) InvStG, a mixed fund generally has to be required by its investment conditions to invest continuously at least 25% of its active assets in qualifying equity participations.
The exemption for qualifying mixed funds is half the equity-fund exemption: 15% for an ordinary private investor.
Other fund types
A fund that isn't an equity or mixed fund doesn't automatically get the 30% or 15% equity-related exemption. Qualifying real estate funds have their own rules and different percentages. Those are outside this guide.
Where to check your ETF
Look in the official fund documents and, where available, at your broker's tax classification:
- The prospectus and the legally binding investment policy (Anlagebedingungen).
- The issuer's tax-classification information.
- The tax information in your broker's annual statement.
The TER, the fund's domicile, the index it tracks and the Acc/Dist label are all useful to know. None of them is the fund's legal tax classification.
Does Teilfreistellung apply to accumulating ETFs?
It can, yes. The partial exemption is about qualifying types of investment-fund income, and that's more than cash dividends.
Under § 16 InvStG, investment-fund income includes:
- Distributions: money paid out by a distributing fund.
- Vorabpauschale: a legally defined yearly advance amount that can arise even if you don't sell.
- Gains on selling fund units: the relevant gain when you sell.
Where the fund qualifies, the partial exemption applies to all three. So an accumulating ETF is not automatically tax-free until you sell. We explain the Vorabpauschale in its own guide.
And if your ETF loses value?
The partial exemption works on qualifying losses too. If you sell qualifying equity-fund units at a loss, you generally can't count the whole loss for tax. The same 30% adjustment applies when the tax-relevant amount is worked out. The rules on when losses can be offset still apply.
Simplified illustration: a €2,000 realised loss on a qualifying equity fund generally becomes a €1,400 tax-relevant amount after the 30% adjustment, before other restrictions and loss-offset rules. That doesn't mean the tax office sends you €1,400.
How it fits with your €1,000 allowance
The Sparer-Pauschbetrag is a separate allowance for capital income. For 2026 the statutory amounts are:
- €1,000 per person, or
- €2,000 for spouses assessed jointly for German income tax.
For a simplified equity ETF gain, apply the fund's partial exemption first. Then take off whatever is left of your yearly allowance, together with any other relevant income and offsets.
A Freistellungsauftrag is the instruction that lets a German bank or broker take your allowance into account when it withholds tax. If you use several institutions, the total you allocate has to stay within your limit.
Five things people often get wrong
“Every ETF gets the 30% exemption.”
No. The ETF has to qualify under the German fund classification rules.
“The government pays me 30% of my profits.”
No. A qualifying part of the income is simply left out of the tax calculation.
“Teilfreistellung and the Sparer-Pauschbetrag are the same thing.”
No. One depends on the fund's classification. The other is a yearly allowance for your capital income.
“Accumulating ETFs are completely tax-free until I sell.”
No. A Vorabpauschale can arise in some years even without a payout or a sale.
“The 30% exemption also applies to individual shares.”
No. The equity-fund exemption described here applies to qualifying investment funds, not to shares you hold directly.
Questions about the 30% exemption
Is Teilfreistellung automatic?
A broker that handles German investment tax will generally build the fund's classification into its tax calculations. The result still depends on correct information about the fund and your account. With a foreign broker, you may have to report the income yourself.
Does the fund need to be based in Germany?
No. Where a fund is domiciled and whether it meets the German classification rules are two different questions. Check the fund's actual eligibility and how your broker reports it.
Is the exemption the same if I hold fund units as business assets?
Not necessarily. Different rates can apply to business assets and to companies. This guide is about ordinary private investors.
What happens if the fund's classification changes?
German law has specific rules for changes in the partial-exemption rate. If a fund is reclassified, review it carefully. The old rate doesn't automatically continue.
The one thing to remember
A qualifying equity ETF can have 30% of its relevant income left out of German tax. That depends on the fund's classification, and it doesn't remove capital income tax altogether.
Before you invest, look at the ETF's index, costs, diversification and risk. If you want to understand the German tax side, check its tax classification as well.
Check yourself
You make a €1,000 gain on an equity ETF. How much of it counts for tax, before your allowance?
Video lesson · In the makingTeilfreistellung in 5 minutes
Official sources
- § 2(6)–(7) InvStG: Definitions of equity and mixed funds
- § 20 InvStG: Teilfreistellung
- § 16 InvStG: Investment fund income
- § 18 InvStG: Vorabpauschale
- § 19 InvStG: Gains from the sale of investment fund units
- § 20(9) EStG: Sparer-Pauschbetrag
- § 32d EStG: Separate taxation of capital income
- § 4 SolzG 1995: Solidarity surcharge
- § 44a EStG: Freistellungsauftrag
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We explain how the German rules work in general. This isn't personal tax, legal or financial advice, and your bank, employer or tax office may treat your own case differently.