Proposed tax changes from 01.01.2025 (Jahressteuergesetz 2024)

[PandaMunich]

If I keep my existing SIPP until I die, and the Investments within it then pass automatically to someone in the UK, am I right in thinking that this would be subject to inheritance tax in Germany but not income tax in Germany.

Yes.

[Anne Britz]

Hello, thanks to those responsible for relocating Toytown! It was a huge relief to find you again.

I have been sporadically following the IRA discussions for several years in anticipation of making RMD withdrawals from 2026. These new changes could have quite an impact on me. However, my IRAs were opened in the late 1980s. I moved to Germany in 1992, made contributions from my after-tax German earnings for 1993-97, and then simply let them accumulate capital gains.

Back then Germany didn't offer plans for investing for retirement and didn't tax capital gains from stock. Will my IRAs enjoy some sort of grandfathering/Bestandsschutz and not be taxed in Germany at all, haha? Will the Finanzamt pick a date (e.g. Dec 31, 2017, when the cap gains tax changed) after which my additional gains will be taxed according to the new law? Or will they attempt to apply the new rules on ALL of my gains, meaning I should start selling now!?

Thanks in advance to anyone with insight on this situation!

Anne, retired in Berlin

[alma.freya]

Are there likely to be any changes to the law when it is discussed in the Bundesrat?

Also does the coalition collapse have any impact on the law? I assume not as it's already passed the Bundestag.

[PandaMunich]

Or will they attempt to apply the new rules on ALL of my gains, meaning I should start selling now!?

That's it.
And to be clear, them taxing only the gains (= difference between what was paid in and what was paid out) was the old rule.
The new rule is that you have to tax 100% of the withdrawal (= what you paid in + gains over all these years).

Of course, the small part of the withdrawals that pertain to your "contributions from my after-tax German earnings for 1993-97" will continue to fall under the old rule, i.e. there, you will only have to tax the gain (= difference between what was paid in and what was paid out).
The problem will be identifying that part.

[PandaMunich]

Are there likely to be any changes to the law when it is discussed in the Bundesrat?

There will be some minor changes, e.g. the lawyers are not happy that it forbids them to use their lawyer-specific electronic bEA software from being used to write messages to the Finanzamt, so they will get overturned in the Bundesrat: https://rsw-beck-de.translate.goog/aktu ... r_pto=wapp

But the things we care about, i.e. the "real" tax stuff, will not change.
So no hope there.

Also does the coalition collapse have any impact on the law? I assume not as it's already passed the Bundestag.

No, as you said, it has already passed the Bundestag.

[alma.freya]

Are there likely to be any changes to the law when it is discussed in the Bundesrat?

There will be some minor changes, e.g. the lawyers are not happy that it forbids them to use their lawyer-specific electronic bEA software from being used to write messages to the Finanzamt, so they will get overturned in the Bundesrat: https://rsw-beck-de.translate.goog/aktu ... r_pto=wapp

But the things we care about, i.e. the "real" tax stuff, will not change.
So no hope there.

Thanks. I am most interested in Artikel 11 Änderung des Investmentsteuergesetzes, specifically 5.2.b:

im Zeitpunkt der Veräußerung im Sinne des Satzes 1 unmittelbar oder mittelbar Investmentanteile
an dem Investmentfonds hält, deren Anschaffungskosten mindestens 500 000 Euro betragen

https://www.bundesrat.de/SharedDocs/dru ... onFile&v=1 (page 22)

Mostly I am interested to know if they will reduce this limit, or make an adjustment so that it covers all Investmentfonds rather than 500 000 per Investmentfonds.

[PandaMunich]

I am most interested in Artikel 11 Änderung des Investmentsteuergesetzes, specifically 5.2.b:

im Zeitpunkt der Veräußerung im Sinne des Satzes 1 unmittelbar oder mittelbar Investmentanteile
an dem Investmentfonds hält, deren Anschaffungskosten mindestens 500 000 Euro betragen

https://www.bundesrat.de/SharedDocs/dru ... onFile&v=1 (page 22)

Mostly I am interested to know if they will reduce this limit, or make an adjustment so that it covers all Investmentfonds rather than 500 000 per Investmentfonds.

No, don't worry.

This is a measure meant to catch out people who own at least 1% of a German company (GmbH or UG or AG) and who until now, when moving away from Germany, avoided paying exit tax according to the existing § 6 AStG, simply by creating an investment fund just for themselves and then sticking their shares into that investment fund.
Because then they no longer owned at least 1% of a German company and rhey didn't have to pay exit tax.
So all they're doing now is closing a loophole.

[alma.freya]

I am most interested in Artikel 11 Änderung des Investmentsteuergesetzes, specifically 5.2.b:

im Zeitpunkt der Veräußerung im Sinne des Satzes 1 unmittelbar oder mittelbar Investmentanteile
an dem Investmentfonds hält, deren Anschaffungskosten mindestens 500 000 Euro betragen

https://www.bundesrat.de/SharedDocs/dru ... onFile&v=1 (page 22)

Mostly I am interested to know if they will reduce this limit, or make an adjustment so that it covers all Investmentfonds rather than 500 000 per Investmentfonds.

No, don't worry.

This is a measure meant to catch out people who own at least 1% of a German company (GmbH or UG or AG) and who until now, when moving away from Germany, avoided paying exit tax according to the existing § 6 AStG, simply by creating an investment fund just for themselves and then sticking their shares into that investment fund.
Because then they no longer owned at least 1% of a German company and rhey didn't have to pay exit tax.
So all they're doing now is closing a loophole.

Does it not also apply to people who have acquired over 500 000 of an ETF? E.g. if I receive an inheritance of 550 000 and purchase shares via an ETF, I would also be liable to pay the exit tax.

[Anne Britz]

Or will they attempt to apply the new rules on ALL of my gains, meaning I should start selling now!?

That's it.
And to be clear, them taxing only the gains (= difference between what was paid in and what was paid out) was the old rule.
The new rule is that you have to tax 100% of the withdrawal (= what you paid in + gains over all these years).

Of course, the small part of the withdrawals that pertain to your "contributions from my after-tax German earnings for 1993-97" will continue to fall under the old rule, i.e. there, you will only have to tax the gain (= difference between what was paid in and what was paid out).
The problem will be identifying that part.

Thank you for your quick response, Panda!

Luckily I've kept all my documentation, so I'll be able to prove which contributions were after tax.

[PandaMunich]

Does it not also apply to people who have acquired over 500 000 of an ETF? E.g. if I receive an inheritance of 550 000 and purchase shares via an ETF, I would also be liable to pay the exit tax.

Yes, but in that case, a colleague of mine has come up with a workaround, i.e. you can still avoid exit tax if these are "normal" investment shares that are traded on a stock exchange, which ETF (= exchange-traded funds) of course are.

This colleague is specialised in minimising tax for people who move away from Germany, his name is Stefan Renger: https://steuerkiller.com/
--> book a consultation with him if you have this problem.