Funds & Teilfreistellung

Teilfreistellung (partial exemption) means that a fixed percentage of your income from funds and ETFs is tax-free (§ 20 InvStG). For equity funds it is 30 %, for mixed funds 15 %, for real estate funds 60 % or 80 %, for bond and money market funds 0 %. Which rate applies depends solely on the fund type – and with a foreign broker you often have to set that yourself.

What does Teilfreistellung mean?

Since the 2018 investment tax reform, investment funds pay corporate tax themselves on certain German income – such as German dividends or rent from German property – and this applies to domestic and foreign funds alike (§§ 6, 7 InvStG). On top of that come taxes levied abroad on the fund's income. So that this prior burden is not taxed again in full at the investor level, the law exempts a flat share of fund income. The rate is higher the more heavily a fund type is typically pre-taxed.

The partial exemption applies equally to all three kinds of fund income:

• distributions (§ 16 Abs. 1 Nr. 1 InvStG),
• the Vorabpauschale (advance lump sum) for accumulating and low-distributing funds (§ 18 InvStG),
• gains from selling fund units (§ 19 InvStG).

The rates at a glance

Equity participations (Kapitalbeteiligungen) are essentially listed shares and units of other equity funds (§ 2 Abs. 8 InvStG). An MSCI World or S&P 500 ETF whose fund terms require it to invest more than 50 % in shares at all times is an equity fund.

Mixed funds, real estate funds and bond funds

Mixed funds: A multi-asset or portfolio ETF that holds at least 25 % shares under its fund terms is a mixed fund with 15 % exemption. Above 50 % it is an equity fund. Below 25 %, or if no quota is set, the rate is generally 0 % (exception: proof of the actual quota under § 20 Abs. 4 InvStG, see below).

Real estate funds: Open-ended real estate funds and real estate ETFs get 60 %, or 80 % if they invest predominantly in foreign property. The high rates reflect that rental income is often already taxed abroad.

Don't confuse this with a single US REIT such as Realty Income: that is a company, not a fund. capi.tax treats known REITs as shares – with no partial exemption.

Bond funds (bond ETFs) and money market funds meet none of the quotas. They are still investment funds under the InvStG, but their partial exemption is 0 %. That does not mean they are treated like shares: their income still belongs in the Anlage KAP-INV, on its own lines.

Commodity products are a special case – their classification is unsettled, please check it. A US gold ETF such as GLD is legally a trust holding physical gold; whether it counts as an investment fund or should rather be treated like a gold security (comparable to Xetra-Gold) is not conclusively settled. US commodity ETFs such as USO or UNG are set up as partnerships and are not investment funds under § 1 Abs. 3 S. 1 Nr. 2 InvStG.

Worked examples

All figures are example values in euros.

Selling an equity ETF at a gain: You sell units of an MSCI World ETF for a €2,000.00 gain. 30 % = €600.00 stays tax-free, €1,400.00 is taxable. At 25 % plus solidarity surcharge that is €350.00 + €19.25 = €369.25.

Distribution from a mixed fund: €400.00 distribution, 15 % exempt = €60.00, taxable €340.00.

Real estate fund: €1,000.00 gain, 60 % exempt = €600.00, taxable €400.00. With predominantly foreign property (80 %) it would be only €200.00.

Bond ETF: €500.00 distribution, 0 % exempt, taxable €500.00.

The partial exemption also reduces losses

Often overlooked: the partial exemption works in both directions. If you sell equity fund units at a €1,000.00 loss, only €700.00 is deductible – the other 30 % is disregarded. The tax authorities take the same view in the BMF application decree on the InvStG of 21 May 2019 (on § 20 InvStG). capi.tax therefore applies the partial exemption regardless of sign. The remaining fund loss goes into the general loss pot, not the share pot (see Loss offsetting).

Are US ETFs investment funds too?

Yes. The German Investment Tax Act does not depend on where a fund is domiciled. A US-listed ETF such as SPY, QQQ or VTI is just as much an investment fund for tax purposes as an Irish or Luxembourg UCITS ETF. Its distributions are not dividends for the Anlage KAP but investment income for the Anlage KAP-INV.

The catch is the fund type. The equity and mixed fund quotas generally have to be set out in the fund terms (Anlagebedingungen). European UCITS ETFs aimed at the German market usually state their equity quota explicitly; US ETFs often don't. Without such a commitment, you only get the partial exemption on application: you have to prove that the fund actually exceeded the quota continuously during the calendar year (§ 20 Abs. 4 InvStG). Whether you can do that for a particular US ETF depends on your individual case.

ADRs (American Depositary Receipts), on the other hand, are not funds but certificates representing shares of a foreign company. They are taxed like shares.

How does capi.tax classify your funds?

Neither Interactive Brokers nor Tastytrade supplies the German fund type. IBKR even files ETFs in the same category as shares, and Tastytrade calls both "Equity". capi.tax therefore works in three steps:

1. Known US ETFs: A short, fixed list of large US ETFs is built in. Broad equity ETFs such as SPY, QQQ, IWM, VOO, VTI or the sector ETFs (XLF, XLK …) are classified automatically as equity funds at 30 %, bond ETFs such as TLT, AGG or BND as other funds at 0 %. Commodity products such as GLD, SLV, USO or UNG are on this list too and are calculated as other funds at 0 % by default – that is only a default, their classification is unsettled (see above), please check it. For every listed ETF: the classification is a default, not a determination.
2. Fund detection for Interactive Brokers: The IBKR export (CSV and Flex Query) contains the ISIN and instrument name. If the ISIN starts with IE or LU, or the name contains terms such as "ETF" or "UCITS", capi.tax recognises a fund – but cannot know which type. Such securities are first calculated as shares, without partial exemption, and you get a visible notice that the fund type is missing.
3. Your classification: In the Adjustments tab under Symbol classification you assign each security yourself: share, equity fund (30 %), mixed fund (15 %), real estate fund (60 %), foreign real estate fund (80 %) or other investment fund (0 %). Your choice overrides any default and is stored with a reason in the audit trail.

The Tastytrade export contains no ISIN or instrument name. Only the fixed list from step 1 applies there. An ETF that is not on the list is calculated as a share without any notice. If you hold funds at Tastytrade, classify them yourself.

Where to find the fund type: in the fund terms or the factsheet, often under "Teilfreistellung" or "Aktienfonds gemäß § 2 Abs. 6 InvStG". For UCITS ETFs aimed at the German market, the provider's product page usually states it directly.

Where do I enter fund income? The Anlage KAP-INV

Fund income without German withholding does not go in the Anlage KAP but in the Anlage KAP-INV. There you enter the gross values before partial exemption, split by fund type. The tax office recognises the fund type from the line and deducts the partial exemption itself. If you entered the already-reduced amount, it would be applied twice.

capi.tax maps the values to these lines:

In the example above you enter €2,000.00 on line 14, not €1,400.00. Compare the line numbers with the official instructions for your tax year.

Not covered are fund units bought before 2018 (old units with their own lines and special rules, § 56 InvStG). capi.tax calculates the Vorabpauschale once you enter the fund prices yourself – see Vorabpauschale.

Related questions

• Do I have to deduct the partial exemption myself?
• Does the partial exemption apply to bond ETFs?
• Does the partial exemption apply on top of the saver's allowance?
• Is a REIT a real estate fund?
• Why do I have to set the fund type myself?

See also: Fund income goes on the Anlage KAP-INV – see Anlage KAP, KAP-INV & SO; the yearly advance lump sum is explained under Vorabpauschale.

Last updated: October 12, 2026