die  Abgeltungssteuer

C1

Estimated CEFR level.

/ˈapɡɛltʊŋsˌʃtɔʏɐ/

📖 What Exactly is 'die Abgeltungssteuer'?

The Abgeltungssteuer is a form of Quellensteuer (withholding tax) in Germany levied on private capital gains, such as interest, dividends, and realized capital gains from securities. Its name derives from the fact that the tax liability is considered 'abgegolten' (settled, compensated) once the tax is withheld by the paying agent (e.g., a bank). This means that this income generally no longer needs to be declared in the personal income tax return (Einkommensteuererklärung).

The tax rate is a flat rate, currently 25%, plus a solidarity surcharge (Solidaritätszuschlag) and, if applicable, church tax (Kirchensteuer).

⚠️ Important: There are exceptions and options (e.g., Günstigerprüfung – assessment to check for a lower personal tax rate) where declaring it in the tax return might be beneficial.

🧐 Grammar Spotlight: Die Abgeltungssteuer

The word "Abgeltungssteuer" is a feminine noun. It is a compound noun formed from "Abgeltung" (settlement, compensation) and "Steuer" (tax). Since the base word "Steuer" is feminine (die Steuer), the compound noun is also feminine.

Declension:

Example Sentences

• Die Bank führt die Abgeltungssteuer automatisch ab. (The bank automatically remits the final withholding tax.)
• Die Höhe der Abgeltungssteuer beträgt pauschal 25 Prozent. (The amount of the final withholding tax is a flat 25 percent.)
• Mit Einführung der Abgeltungssteuer wurde die Besteuerung von Kapitalerträgen vereinfacht. (With the introduction of the final withholding tax, the taxation of capital gains was simplified.)
• Er informierte sich über Freibeträge bei der Abgeltungssteuer. (He informed himself about allowances regarding the final withholding tax.)

🏦 Everyday Use: When Do We Talk About 'die Abgeltungssteuer'?

The term Abgeltungssteuer is mainly used in the context of finance, taxes, and investments.

• Context: Discussions about tax systems, personal finance, banking, capital gains (interest, dividends, profits from selling shares after a certain holding period, etc.).
• Typical Use: In news about tax changes, during consultations with banks or tax advisors, in specialist articles about investment.
• Distinction: The Abgeltungssteuer is a specific type of Kapitalertragsteuer (capital gains tax). Before its introduction in 2009, capital gains were taxed differently (often at the personal income tax rate). It's also a form of Quellensteuer (withholding tax) because it's withheld directly at the source (e.g., the bank).

🧠 Mnemonics for 'Abgeltungssteuer'

Article Mnemonic: The base word is "die Steuer" (the tax). Many tax-related words in German are feminine (die Steuer, die Gebühr, die Abgabe). So, remember: it ends in -steuer, therefore it's die Abgeltungssteuer.

Meaning Mnemonic: Think of "abgegolten" which means "settled" or "compensated". The tax debt on your investment income is settled by this tax, directly withheld by the bank. It's an "up-gelt" (up-front settlement) tax.

↔️ Related Terms: Synonyms & Antonyms

⚠️ Risk of Confusion:

• Einkommensteuer: Income tax, taxes overall income, whereas Abgeltungssteuer only concerns capital gains (and often exempts them from the regular income tax assessment).
• Körperschaftsteuer: Corporate income tax (for companies like GmbH, AG).

😄 A Little Tax Joke

German: Fragt der Finanzbeamte den Steuerzahler: "Haben Sie Hobbys, die Geld kosten?" Antwortet der Steuerzahler: "Ja, meine Steuererklärung! Und seit Neuestem auch die Abgeltungssteuer auf meine drei Euro Zinsen..."

English Translation: The tax officer asks the taxpayer: "Do you have any hobbies that cost money?" The taxpayer replies: "Yes, my tax return! And recently also the Abgeltungssteuer on my three euros of interest..."

📜 Poem About the Tax

German:
Auf Zins und Dividende, Jahr für Jahr,
Nimmt der Staat sich, was ihm gebührte, fürwahr.
Die Abgeltungssteuer, pauschal und glatt,
Macht die Abrechnung einfach, in der Stadt.
Die Bank behält's ein, direkt und schnell,
So ist's abgegolten, an dieser Stell'.

English Translation:
On interest and dividends, year by year,
The state takes its share, it's truly clear.
The final withholding tax, flat and neat,
Makes settlement simple, can't be beat.
The bank deducts it, quick and fast,
So it's settled now, the die is cast.

❓ A Little Riddle

German:
Ich bin 'ne Steuer, feminin und schlau,
nehm' Prozente von Zinsen, ganz genau.
Die Bank zieht mich ab, dann ist Ruh',
Dein Kapitalertrag macht 'ne Diätkur zu.

Wer bin ich?

English Translation:
I'm a tax, feminine and smart,
Taking percentages off interest, playing my part.
The bank deducts me, then all is calm,
Your capital gains go on a diet psalm.

Who am I?

Solution: die Abgeltungssteuer

💡 Other Information

Word Composition:

The word "Abgeltungssteuer" is a compound noun (Kompositum) made of:

• Die Abgeltung: Meaning settlement, compensation, satisfaction of a claim, lump-sum payment.
• Die Steuer: A tax, i.e., a monetary contribution levied by a public authority to generate revenue, without entitlement to a specific individual counter-performance.

Introduction: The Abgeltungssteuer was introduced in Germany on January 1, 2009.