Freistellungsauftrag 2026: Germany’s Complete Guide to Tax-Free Investment Income
This article provides general information only and does not constitute tax advice. Tax laws vary by individual circumstance. Consult a qualified tax advisor in your country of residence.
If you invest in dividend stocks or ETFs through a German broker, you are legally entitled to receive up to €1,000 per year in investment income completely tax-free. The instrument that makes this possible is called the Freistellungsauftrag — an exemption order you file directly with your broker. Most investors can set it up in under three minutes.
Yet a surprising number of European investors using platforms like Trade Republic or Scalable Capital either have it configured incorrectly, or have never set it up at all. Every year this omission costs them hundreds of euros in avoidable tax deductions.
This guide covers everything you need to know: what the Freistellungsauftrag is, how much you can exempt in 2026, how to set it up at each major broker, how to split it correctly across multiple accounts, and how to reclaim taxes if you missed it entirely.
Table of Contents
- What Is the Freistellungsauftrag?
- The Sparerpauschbetrag in 2026: Key Numbers
- Which Income Is Covered?
- How Much Can You Actually Save?
- How to Set It Up: Step-by-Step
- Broker Comparison: Trade Republic vs. Scalable Capital vs. ING
- Splitting Across Multiple Brokers
- Common Mistakes to Avoid
- What If You Forgot? How to Reclaim Overpaid Tax
- FAQ
1. What Is the Freistellungsauftrag?
The Freistellungsauftrag (literally: exemption order) is the official instruction you give your German bank or broker to stop withholding tax on your investment income — up to a legally defined annual limit.
Without one, German banks are legally required to deduct the Abgeltungssteuer (a flat withholding tax on capital income) from the very first euro you earn on investments. This happens automatically and silently. You will not receive a warning. The tax simply disappears before the income reaches your account.
With a valid Freistellungsauftrag on file, your broker withholds nothing — as long as your total investment income stays within your exempted amount for the year.
The statutory foundation is Section 44a of the German Income Tax Act (EStG).
Relevant for non-German residents: If you invest through a German-licensed broker such as Trade Republic or Scalable Capital, this guide applies to you directly — regardless of whether you live in Berlin, Brussels, or Barcelona. If your broker is based outside Germany, you will generally need to declare capital income manually via your local tax return.
2. The Sparerpauschbetrag in 2026: Key Numbers
The Sparerpauschbetrag is Germany’s annual tax-free allowance for investment income. The Freistellungsauftrag is the mechanism you use to claim it at source, before tax is ever deducted.
In 2026, the allowance stands at €1,000 per year per person. For married couples and registered civil partners filing jointly, the combined allowance is €2,000.
Until 31 December 2022, the allowance was €801 for individuals and €1,602 for couples. Since 1 January 2023, each investor can exempt €1,000 in capital income per year; spouses filing jointly can exempt €2,000.
| Status | Annual Tax-Free Allowance |
|---|---|
| Single investor | €1,000 |
| Married couple / registered civil partners | €2,000 |
| Child (Junior Depot) | €1,000 |
Important: To use the Sparerpauschbetrag and reduce your tax burden, you must actively submit a Freistellungsauftrag to your bank. The allowance is not applied automatically.
3. Which Income Is Covered?
If you set up a Freistellungsauftrag at your German bank, savings institution, or broker, you receive capital income up to the exempted amount without deduction of Abgeltungssteuer. This covers interest, distributions from funds such as ETFs, dividends, and realised capital gains from securities transactions.
Not covered by the Freistellungsauftrag:
- Rental and real estate income
- Business income
- Riester pension contracts — returns during the savings phase are already tax-free, so no Freistellungsauftrag is needed for those.
4. How Much Can You Actually Save?
The Tax Rate on Investment Income
If your taxable gains exceed the Sparerpauschbetrag, 25.00% Abgeltungssteuer, 5.50% Solidaritätszuschlag, and where applicable church tax are automatically deducted.
This results in an effective tax rate of 26.375% (excluding church tax):
$$\text{Effective Rate} = 25\% + (25\% \times 5.5\%) = 26.375\%$$
Real-World Example
Consider a single investor earning €1,300 per year in investment income across two brokers and a savings account:
| Account | Annual Income | FSA Allocated |
|---|---|---|
| Broker A (Stocks) | €700 | €700 |
| Broker B (ETFs) | €400 | €300 |
| Savings Account | €200 | €0 |
| Total | €1,300 | €1,000 |
Without any Freistellungsauftrag:
$$€1{,}300 \times 26.375\% = \textbf{€342.88 tax}$$
With optimally distributed Freistellungsauftrag:
$$€300 \times 26.375\% = \textbf{€79.13 tax}$$
Annual saving: €263.75
Compounded over 10 years at 6% annual reinvestment, that €263.75 saved each year accumulates to roughly €3,470 in additional portfolio value — from filling out a single form. For more on how reinvested returns compound over time, see our guide on dividend yield on cost: How to Calculate the Yield on Cost.
5. How to Set It Up: Step-by-Step
The process is near-identical at every major German broker:
- Log in to your broker’s app or online banking
- Navigate to Settings → Tax → Freistellungsauftrag
- Enter your Steuer-ID (your 11-digit German tax identification number)
- Set the amount (any value between €1 and €1,000 for individual investors)
- Confirm with a TAN or security code
You must provide your tax identification number (Steuer-ID) for the exemption to be valid. You can find it in your income tax assessment or on your payslip tax certificate.
The Freistellungsauftrag applies retroactively from 1 January of the calendar year — even if submitted as late as December. It can also be amended flexibly up to the applicable deadline.
6. Broker Comparison: Trade Republic vs. Scalable Capital vs. ING
Not all brokers handle the Freistellungsauftrag in the same way. The most important practical difference is for married investors and registered civil partners.
Trade Republic does not offer joint depot accounts. Each customer holds an individual depot, meaning the maximum Freistellungsauftrag per person is capped at €1,000. It is therefore not possible at Trade Republic to set up a joint exemption for a married couple, and support cannot configure it manually either.
At brokers such as Scalable Capital, Traders Place, and Smartbroker+, the Freistellungsauftrag is stored directly at the partner bank, which allows joint filing for married couples.
| Feature | 🟢 Trade Republic | 🔵 Scalable Capital | 🏦 ING |
|---|---|---|---|
| Where to set up | App → Profile → Settings → Tax | Profile → Tax | Online Banking → Service → Tax |
| Joint FSA for couples | ❌ Not possible | ✅ Possible | ✅ Possible |
| Max. single investor | €1,000 | €1,000 | €1,000 |
| Max. couple | 2 × €1,000 (separate) | €2,000 (joint) | €2,000 (joint) |
| Steuer-ID required | ✅ Yes | ✅ Yes | ✅ Yes |
| Change anytime | ✅ Yes | ✅ Yes | ✅ Yes |
| Couple’s loss offsetting | ❌ No | ✅ Yes | ✅ Yes |
⚠️ Couples using Trade Republic: For individuals, the Sparerpauschbetrag is €1,000; for jointly assessed spouses or civil partners, it is €2,000. Since Trade Republic does not offer joint depot accounts, both partners can each submit a separate Freistellungsauftrag of up to €1,000 on their individual depots. The full €2,000 couple’s allowance is achievable — but only through two separate submissions, not one joint order.
7. Splitting Across Multiple Brokers
You can submit Freistellungsaufträge at multiple banks. One exemption order per financial institution covers all accounts and depots held there — a separate order per account is not necessary.
If you use multiple brokers, you can split the €1,000 Sparerpauschbetrag and assign partial amounts to each. Estimate your expected income per broker and distribute carefully. You set each amount yourself.
Practical tracking example:
| Broker | FSA Set | Estimated Income | Status |
|---|---|---|---|
| Trade Republic | €700 | ~€680 | ✅ On track |
| Scalable Capital | €300 | ~€310 | ⚠️ Monitor |
| Total | €1,000 | ~€990 | ✅ Within limit |
The combined total of all your Freistellungsaufträge must not exceed €1,000 per person. The tax authorities cross-reference exemption data and identify inflated amounts. Repeated violations can be treated as an administrative offence.
Best practice: Review your allocation every January and adjust based on the previous year’s actual income per broker.
8. Common Mistakes to Avoid
| ❌ Mistake | ✅ Solution |
|---|---|
| No FSA at all — bank deducts 26.375% from euro one | Set it up immediately at every broker holding income-generating positions |
| Combined FSA across brokers exceeds €1,000 | Track all allocations in a simple spreadsheet |
| Forgetting to review after opening a new account | Audit your FSA split every January |
| Couples at Trade Republic expecting a joint FSA | Submit two individual FSAs of up to €1,000 each |
| FSA set too low — partial over-deduction | Adjust mid-year; banks can retroactively refund within the same calendar year |
| Closing a depot without cancelling the FSA | Cancel explicitly — brokers do not always remove it automatically on account closure |
It is advisable to review your Freistellungsaufträge regularly — particularly after life changes such as marriage, the birth of a child, or an inheritance.
9. What If You Forgot? How to Reclaim Overpaid Tax
Missing the Freistellungsauftrag for a full year does not mean the money is permanently lost.
If you forgot to submit a Freistellungsauftrag, the overpaid Abgeltungssteuer can be reclaimed via your annual tax return. This also applies if you distributed your allowance sub-optimally across brokers.
Capital income is reported to the tax office via Anlage KAP in the income tax return. Your bank will issue a certificate of withheld amounts, which you attach to your tax return.
If a Freistellungsauftrag is submitted during the current calendar year, already-withheld taxes can be refunded retroactively within that same year.
If your income tax rate is below 25%, a Günstigerprüfung (favourability check) may also be worthwhile. You request this via the tax return, and if your personal rate is lower than the flat capital gains rate, you receive a refund of the difference.
10. FAQ
Can I change my Freistellungsauftrag during the year?
Yes. You can adjust the amount at any time. Changes made mid-year apply retroactively from 1 January of that calendar year, and any over-withheld taxes are refunded by the broker within the same year.
What happens if I have no German tax ID (Steuer-ID)?
Without a valid Steuer-ID, your broker is legally required to withhold Abgeltungssteuer regardless of any Freistellungsauftrag on file. Your Steuer-ID is issued automatically by the German Federal Central Tax Office and can be found in any prior tax assessment or payslip.
I am married. Can we pool our allowances at a single broker?
At most traditional banks and several neo-brokers (e.g. Scalable Capital), yes — a joint Freistellungsauftrag of up to €2,000 is possible. At Trade Republic specifically, joint orders are not supported; both partners must each submit individual orders of up to €1,000.
What if my total Freistellungsaufträge across all brokers exceed €1,000?
The Federal Central Tax Office cross-references data from all German financial institutions. Excess exemptions will be detected and taxed retrospectively. Repeated over-exemption can be treated as an administrative offence.
Can children have their own Freistellungsauftrag?
Yes. Each child has their own individual Sparerpauschbetrag of €1,000 per year. Parents can submit a Freistellungsauftrag on behalf of minor children for a Junior Depot.
Key Takeaways
The Freistellungsauftrag is one of the most effective and frictionless tax optimisation steps available to retail investors in Germany. The setup takes minutes; the annual saving — up to €263.75 for a single investor fully utilising the allowance — compounds significantly over time.
- Set it up immediately at every broker where you hold income-generating positions
- If you are married and use Trade Republic, both partners must submit separate orders — a joint FSA is not available on that platform
- Never let your combined allocation exceed €1,000 per person across all brokers
- Review your split every January, especially after any change in income levels, broker setup, or marital status
- If you missed it this year, file Anlage KAP with your tax return to reclaim what was over-withheld
This is Part 1 of the yieldcompass.io European Dividend Tax Series. Next up: Austria’s 27.5% KESt — and how it compares to Germany’s Abgeltungssteuer.
Transparency: Tax figures in this article reflect German tax law as of January 2026. Rates and allowances are subject to change. Always verify current figures with your broker or a qualified tax advisor. Last reviewed: April 2026.
All content on yieldcompass.io is for informational purposes only and does not constitute tax, legal, or investment advice. Tax treatment depends on your individual circumstances and may change. For specific questions, consult a qualified tax advisor. Capital investments carry risk. Past returns are not a reliable indicator of future results.
