If you’re moving to Germany with an existing ETF portfolio, here is the honest summary up front: you almost certainly do not need to sell anything, your funds stay exactly where they are, and the move itself is not a taxable event. What changes is the tax logic wrapped around your portfolio. From the day you become a German tax resident, Germany taxes your worldwide investment income, and it does so through a system with its own vocabulary: Abgeltungsteuer, Vorabpauschale, Teilfreistellung and the Sparer-Pauschbetrag.
I’ve helped several readers through this exact corridor, and the pattern is always the same. The German system looks intimidating from outside because the words are long. Once translated, it’s one of the more predictable regimes in Europe, and it contains a genuine perk (Teilfreistellung) that many arrivals don’t know exists. The real decision is not about your funds at all. It’s about your broker, because whether your broker handles German tax automatically determines how much paperwork lands on your desk every spring.
If this topic matters to your portfolio, start with my Trade Republic ETF savings plan setup.
Everything here is conceptual and 2026-vintage; German tax law shifts in small ways most years, so confirm current figures with a Steuerberater or the official sources before you file anything.
Taxes are where European investors win or lose the most — Module 5 of our Masterclass covers 30+ countries with worked examples — plus fund choice, brokers and execution.
See the full curriculum — €147, 30-day guarantee →Day one: German tax residency and the flat tax on investments
Germany generally treats you as tax resident once you have a home or your habitual abode there, and residency usually starts from arrival, not from the following January. From that point, your capital income worldwide falls under German rules. It doesn’t matter that your ETFs sit with a broker in Ireland, the Netherlands or the US. What matters is where you live.
The headline rate is the Abgeltungsteuer, a flat tax on investment income of 25%, plus the solidarity surcharge, bringing the effective rate to roughly 26.375% (church members pay a little more). It covers dividends, interest and capital gains on your ETFs, with no long-term holding discount: a gain realised after ten years is taxed the same as one realised after ten months.
The good news: the flat tax is final for most people, so investment income stays out of your progressive income tax bands. And if your personal rate is below 25%, you can opt to have capital income taxed at that lower rate instead — arrivals with low German income in a part-year sometimes benefit, which is exactly the detail a Steuerberater earns their fee on.
Vorabpauschale: the deemed income on accumulating ETFs
This is the rule that surprises most people arriving from countries where accumulating funds simply compound untouched. Each January, Germany pretends your accumulating ETF paid you a small notional income for the previous year, based on your fund’s value and a base rate derived from government bond yields, and taxes that notional amount.
Before you panic: the amounts are usually modest, the deemed income is capped at the fund’s actual gain for the year (a fund that fell in value generates no Vorabpauschale), and everything you prepay is credited against your eventual capital gains tax when you sell. It’s a prepayment mechanism, not an extra tax. I’ve written a full worked example in my Vorabpauschale math guide, and you can model your own numbers with the Vorabpauschale calculator.
The practical implication for a new arrival: keep a little cash at your broker each January, because that’s when the tax on the previous year’s Vorabpauschale is due. German brokers debit it automatically. Foreign brokers don’t, which brings us to the broker question shortly.
Teilfreistellung: the 30% exemption that works in your favour
Here’s the perk. Germany applies a partial exemption, the Teilfreistellung, to income and gains from investment funds. For equity funds, which include any UCITS ETF holding at least 51% equities, 30% of all distributions, Vorabpauschale amounts and capital gains are simply tax-free. Mixed funds get 15%; pure bond funds get nothing.
Run the numbers and the effective rate on an equity ETF drops from about 26.375% to roughly 18.5% — better than what many EU countries charge on fund gains. A typical all-world accumulating ETF qualifies for the full 30% automatically. If your portfolio contains multi-asset or bond funds, the exemption tier differs per fund, worth knowing before you assume every line item gets the same treatment.
The Sparer-Pauschbetrag: your annual tax-free allowance
Every German taxpayer gets a flat annual allowance on capital income, the Sparer-Pauschbetrag, of around €1,000 per person (roughly €2,000 for a jointly assessed couple; verify the current figure). Dividends, interest, Vorabpauschale and realised gains all count against it, and below the allowance you pay nothing.
With a German broker, you activate it by filing a Freistellungsauftrag, a standing exemption order, in the app; you can split it across several brokers. With a foreign broker you claim the allowance through your tax return instead. Either way, an arriving investor with an accumulating world ETF portfolio will often find the Vorabpauschale fits entirely inside the allowance in normal years, meaning the famous German fund tax costs them precisely zero.
Keep your broker or switch to a German one?
Your funds don’t care where you live. Your broker does. German brokers act as your tax agent: they withhold Abgeltungsteuer on every sale and dividend, debit the Vorabpauschale each January, apply your Freistellungsauftrag and the correct Teilfreistellung, and in the standard case you never file anything for your investments. Foreign brokers, including Interactive Brokers, withhold nothing for Germany. Everything still gets taxed, but you self-report through the Anlage KAP form in your annual return and pay in arrears.
| Feature | German broker (e.g. a local Depot) | Foreign broker (e.g. IBKR) |
|---|---|---|
| Abgeltungsteuer on sales/dividends | Withheld automatically at source | Not withheld — you self-report via Anlage KAP |
| Vorabpauschale each January | Calculated and debited automatically | You calculate and declare it yourself |
| €1,000 allowance | Freistellungsauftrag applies it in real time | Claimed later in the tax return |
| Teilfreistellung (30% equity exemption) | Applied automatically | You apply it in your own calculation |
| Annual tax filing needed for investments | Usually none in the standard case | Yes, every year (Anlage KAP) |
| Best suited for | Simplicity, savings plans, staying long term | Large portfolios, multi-currency, serial expats |
If you expect to stay for years and value simplicity, a local Depot is the low-friction path, and the German Sparplan culture is genuinely excellent: thousands of ETF savings plans run free from €1 a month. I’ve ranked the options in my guides to the best ETF savings plans in Germany and the best broker for German investors.
Why Interactive Brokers is the expat’s keep-it-simple option
If your portfolio already lives at Interactive Brokers, my advice is usually: keep it there and update your residency details, at least for the first year. IBKR is one of the few brokers genuinely built for people who cross borders. You notify them of your German address, they migrate you to the appropriate European entity if needed, and your positions, cost history, multi-currency accounts and full UCITS range travel intact.
Ready to open an account? You can open a Interactive Brokers account directly.
The trade-off is the paperwork: IBKR won’t withhold German tax, so you file Anlage KAP annually, with their activity statements as your source documents. For a buy-and-hold portfolio of one or two accumulating ETFs, that’s an evening of work, or a small line on your Steuerberater’s bill. For serial expats who may move again in three years, not having to migrate a portfolio between national brokers every time is worth far more than the filing hassle. I’ve covered the mechanics in Interactive Brokers for expats.
Before you move: three things worth doing
Document your acquisition costs
Germany taxes the gain from your original purchase price, not from the day you arrive. There is generally no step-up of cost basis on immigration: buy at 100, sell at 180 as a German resident, and German tax looks at the full gain, subject to Teilfreistellung. Export complete purchase histories from every broker now — cost-basis records are dramatically easier to obtain before an account migration than after one.
Check your departure country’s exit rules
Some countries apply exit taxes or deemed-disposal rules when you leave, which can interact oddly with German taxation later. Whether realising gains before you move makes sense depends entirely on the corridor you’re travelling, and it’s precisely the cross-border question worth paying a professional for once rather than guessing.
Tell your broker before your residency changes
Brokers occasionally restrict accounts for residents of countries they don’t serve; better to learn that while you can still transfer positions calmly. And if you’re bringing a larger lump sum with you, I’ve covered the German angle in my guide on investing an inheritance in Germany.
What I’d do
If I were making this move with a typical accumulating world-ETF portfolio: sell nothing, export all cost-basis records before leaving, update my address at my existing broker, and hold everything exactly as before. In year one I’d hire a Steuerberater for the first Anlage KAP, both to get it right and to learn the pattern. From year two, if I planned to stay, I’d open a German Depot with a free Sparplan for new contributions, leave the legacy holdings where they are, and file the Freistellungsauftrag on day one. The one habit to build immediately: a small cash buffer at the broker each January for the Vorabpauschale.
The German system rewards exactly the investor most of my readers already are: buy-and-hold, broad accumulating equity funds, few transactions. With the 30% Teilfreistellung and the annual allowance, Germany is a perfectly good country to compound wealth in. Official guidance from the Bundeszentralamt für Steuern is published at bzst.de; your local Finanzamt and a Steuerberater remain the authorities on your specific numbers.
Fourteen countries, one calculation: the free EU dividend tax calculator compares what an investor actually keeps from the same distribution.
Frequently asked questions
Q: Do I have to sell my ETFs when I move to Germany?
A: No. Moving to Germany is not a taxable event and your existing UCITS ETFs remain fully valid holdings. Germany will tax future dividends, deemed income and gains you realise as a resident, but the act of arriving triggers nothing by itself.
Q: Does Germany reset my cost basis when I become resident?
A: Generally no. Germany typically taxes the full gain over your original purchase price when you eventually sell, not just the gain accrued after arrival. Document your acquisition costs before the move, and confirm the details with a Steuerberater, since your departure country’s exit rules can also matter.
Q: What is the Vorabpauschale and how much will it cost me?
A: It’s an annual deemed income on accumulating funds, calculated from your holding’s value and a base interest rate, capped at the fund’s actual yearly gain. The tax is usually modest, is credited against your final capital gains tax on sale, and often fits entirely inside the roughly €1,000 allowance, meaning many investors pay nothing.
Q: Can I keep using Interactive Brokers after moving to Germany?
A: Yes. IBKR serves German residents; you update your address and they assign you to the appropriate European entity with positions intact. The difference versus a German broker is that IBKR withholds no German tax, so you must declare your investment income yourself each year via the Anlage KAP form.
Q: Is an accumulating or distributing ETF better in Germany?
A: Both work, and both benefit from the 30% Teilfreistellung on equity funds. Accumulating funds trigger the Vorabpauschale but still defer most tax until sale; distributing funds generate taxable dividends that can conveniently use up your annual allowance. For long-term compounding, most German investors favour accumulating share classes.
Q: Do I need a German tax adviser as an arriving investor?
A: For your first year, I’d say yes. A Steuerberater will handle the Anlage KAP, check how your arrival year splits between two tax systems, and confirm whether opting for your personal rate beats the flat 26.375%. Once you’ve seen one correct filing, simple buy-and-hold portfolios are manageable on your own.
This guide is part of our guide to moving countries with an ETF portfolio — browse the full cluster for related situations.
European UCITS/ETF investor with 11+ years building a global dividend and index portfolio, and founder of Financial Expert Class. I write every guide here from first-hand experience investing across EU brokers and tax regimes — not theory. More about me →