Tips For Saving On Fixed Tax. Of course, the first question with all tax tips is: Can you minimize the tax burden? In principle, the withholding tax in itself is a legal possibility for higher-income investors to reduce the tax burden on interest or exchange rate gains at the high personal tax rate. Besides, there are seven points that you should pay attention to when investing to avoid excessive taxes.
1 | The Saver’s Allowance
Expenses such as custody or processing fees are taken into account in a flat-rate form via a so-called saver allowance (also called saver lump sum or tax allowance for short) of € 801 (or € 1,602 for spouses).
You can claim excess tax amounts that have been paid as withholding tax by the responsible financial institution, and thus also the exemptions due to you, in your income tax return in the following year. In this case, the responsible tax office is obliged to reimburse you for the unlawfully received tax amount.
2 | Set Up Exemption Orders
With an exemption order from the bank, savings bank, building society or insurance company, you can receive your investment income without deducting tax. You should therefore ensure that you give an exemption order when you open an account or securities account so that you can use the allowance you are entitled to and avoid unnecessary tax payments from the start.
Investors often have several accounts – fixed-term deposits, overnight money, savings book, etc. It is essential to split the exempt amounts sensibly and to distribute them skillfully across the various savings books, overnight money accounts and share custody accounts. Ideally, the saver lump sum is not exceeded on any budget. In the less ideal case, the return on one account is below the tax exemption while the other is above it. You should estimate and calculate this beforehand.
3 | Non-assessment certificate
If you are not liable for income tax, for example, because you have very little income, you are not required to pay capital gains tax. In this case, you can apply for a non-assessment certificate (NV certificate) for your investment income from your responsible tax office. The purpose of the non-assessment certificate is to ensure that no capital gains tax is withheld on investment income.
4 | Lump Sums From Children
Children also have their saver lump sum of € 801. For example, anyone who creates a system for later training or starting an independent life can run this via the child’s tax ID and thus make sensible use of the tax exemption.
5 | Offsetting of losses
Another way to reduce taxes is to lower profits. This is done by offsetting gains with losses. In the case of the withholding tax, however, losses are only offset against income from capital assets. Suppose you have a call money account and a share portfolio. In that case, it is reasonable to assume that you can reduce your interest income from overnight money by possible price losses when selling shares. Unfortunately, this assumption is wrong.
The so-called “horizontal loss compensation” applies here. Only profits and losses from the same type of income can be offset against each other: Losses from the sale of shares can only be offset against profits from the sale of shares. If the losses exceed the earnings within a year, they can also be offset against future profits.
6 | Investment Option
Those who earn less than € 20,000 a year have a correspondingly low personal tax rate, which can even be below the withholding tax rate of 25%.
If the final withholding tax is higher than the individual tax rate, the capital income can be stated in the income tax return. Instead of the 25 per cent flat tax, personal taxation applies.
An application to the tax office is sufficient, and you get the right to have the difference to the withholding tax paid back to you. However, all types of investment income must then also be taxed in this way.
7 | Alternative Investments
The final withholding tax can also generally be avoided through certain types of investment that are less or hardly affected by it.
These include, for example, capital-forming insurance: The income from unit-linked life or pension insurance is only partially taxable at the end of the term. This includes price gains as well as distributions or dividends. Taxation in old age is based on the previously usually lower tax rate.
Tips For Saving On Fixed Tax