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What is an exemption order?

Exemption orders are issued by investors to their banks to exempt interest and other investment income from automatic tax deduction up to the amount of the exemption. The taxable income is not declared in the tax return, as is the case with income tax, for example. Instead, banks and brokers with whom accounts exist automatically pay the tax to the tax office.  

How to save with an exemption order

The exemption order is usually sent to the bank in order to claim the savings allowance and to avoid taxes on capital gains. Capital gains are income that is generated from investments - for example, interest or dividends. The tax-free amount to which every saver is entitled is 801 euros. Married persons are entitled to a joint tax-free allowance of 1,602 euros instead of 801 euros, on which no taxes have to be paid to the tax office. All investment income exceeding this limit is subject to the so-called "Abgeltungssteuer", which is a flat rate of 25 percent. The "Solidaritätszuschlag" of 5.5 percent is also levied on this tax. This results in a total tax rate of 26.38 percent. The church tax may also be added.

How does one submit an exemption order?

The exemption order can be submitted in writing by post or online via the respective website of the bank or broker. When opening an account, the banks provide the necessary forms in printed form. However, it is also possible to download the documents from the website. For existing accounts, the exemption orders can be changed online at any time. The changed exemption amount will then apply to the current year.

Which banks can I submit exemption orders with?

In principle, it is possible to submit exemption orders with all banks and brokers with which money is invested. The exemption amount can be divided among various financial institutions. It is advisable to evaluate in advance what income can be expected from the account and what proportion of the exemption order should be used for this purpose. In this way, the tax-free amount can be optimally split between different accounts.  

When must an exemption order be submitted?

The deadline by which an exemption order must be submitted generally expires on the last bank working day of the year. For some financial institutions, the deadline is somewhat earlier. The specific date is usually shown on the bank's homepage or can be inquired about. If the exemption order is not issued in time, the bank will pay the taxes to the tax office.

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Note

When the deadline for exemption orders is over

The deadline for submitting the exemption orders for the accounts was missed? Don't worry, because now there is still the possibility of making deductions under the tax return! In this way too much paid tax can be reclaimed. -------------------------------------------------------------------------------

What other advantages does an exemption order have?

Persons with lower incomes may have the possibility of realising capital gains in excess of the exemption amount without or with lower tax deductions. Savers must submit a corresponding application directly to their local tax office. If all relevant criteria are met, a so-called "Nichtveranlagungsbescheinigung", can then be submitted to the bank.