Taxes on Capital Interest

This tax is all about the money you make with your money: capital interest.

What is Kapitalertragssteuer?

Kapitalertragsteuer can be regarded as a tax on interest. The government collects taxes on the interest of earnings from capital. If you receive up to € 1,421 interest as an individual (€ 2,842 for married couples), then you owe no such tax. But you need to apply for this exemption by filling out the form “Freistellungsauftrag für Kapitalerträge” from your bank. These € 1,500 are called “Sparerfreibetrag” or Saver’s Tax-Free Amount (§20 IV EStG).
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I am fuming. I just received my bank statement. Somebody grabbed a couple of thousand Euro of some kind of “Zinsabschlagssteuer”. What is happening here?

Zinsabschlagssteuer is just another name for Kapitalertragssteuer. You are taxed on the income you receive from investments. By the way, investments include shares in a corporation, interest on savings accounts, and similar sources. It might be a very good idea to sign a “Freistellungsauftrag” (exemption order for the bank). By signing such an exemption order, you tell the bank not to levy taxes up to the exempted interest income. The “Freistellungsauftrag” is a special form you can sign at any branch of your bank. There is of course the possibility of sharing the exempted amount if you have savings accounts at different banks. 
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