The Freistellungsauftrag: how to stop losing 26.375% on your savings in Germany

There's one form standing between your savings and a quarter of your investment income. Most expats never hear about it until they've already paid the tax.

You opened a German bank account. You set up a broker, started buying ETFs, maybe parked some cash in a Tagesgeld account earning a bit of interest. Everything looks done.

Then your first interest or dividend payment arrives — and a chunk of it is simply gone. Not invested, not held in escrow, just deducted and sent to the Finanzamt. That's the German capital-income tax working exactly as designed, and the only thing that would have stopped it is a one-page order you were never told to file: the Freistellungsauftrag.

What a Freistellungsauftrag actually is

A Freistellungsauftrag — literally an "exemption order" — tells your German bank or broker not to withhold tax on your investment income up to a fixed annual amount, the saver's allowance (Sparer-Pauschbetrag). It covers interest, dividends, and realised capital gains. You file it once per institution, and from then on your gains land in your account in full, up to the cap.

It is not a tax filing, it is not means-tested, and it costs nothing. It's a checkbox and a number, submitted through your bank. The catch is simply that it is opt-in: nobody applies it on your behalf.

What it costs you to skip it

Without an order on file, German banks deduct the full Abgeltungsteuer from the very first euro of investment income — no free band, no grace amount. That's 26.375%: 25% Abgeltungsteuer plus 5.5% Solidaritätszuschlag on top — plus church tax if you pay it. Applied from the first cent of interest, dividends, and realised gains.

The money isn't lost forever — you can reclaim the over-withheld tax through the Anlage KAP in your annual tax return. But that means waiting until the tax year is over, filing a return, and waiting again for the refund. Filing the order up front takes a few minutes; reclaiming the tax afterwards takes a full tax return.

How much you can shelter

Since 2023 the saver's allowance is €1,000 per person per year, or €2,000 for married couples assessed jointly. Any investment income up to that amount is exempt from the 26.375% deduction entirely. For most expats whose savings are still building, that allowance covers all or nearly all of their annual interest and dividends — which is exactly why leaving it on the table is so costly.

How to file it

The whole process lives inside your existing bank or broker. Six steps, about ten minutes:

• —Find your Steuer-ID. You need your 11-digit Steuer-Identifikationsnummer — it's on your payslip, your Lohnsteuerbescheinigung, or the letter the Bundeszentralamt für Steuern sent after your Anmeldung.
• —Open your bank or broker's exemption form. Almost every German bank and broker — Trade Republic, Scalable, ING, DKB, Comdirect — has a Freistellungsauftrag form in their app or online banking, usually under Tax or Settings.
• —Set the allowance amount. Enter up to €1,000 (single) or €2,000 (married, jointly assessed). A joint order requires both partners and unlocks the combined €2,000 cap.
• —Split it if you use several banks. You can spread your allowance across institutions, but the total of all your orders can never exceed your personal cap. Weight each bank by where your interest and dividends actually land.
• —Submit before year-end. Most banks let you backdate the order to 1 January of the current year, so income already earned this year is covered. File before December to capture the full year.
• —Review it once a year. Opened a new account, closed an old one, or got married? Adjust your splits so your full allowance is always working and never over-allocated.

What if you already missed it

If you've been in Germany a while and never filed one, you've almost certainly had tax withheld that your allowance should have covered. You can claim it back: declare your capital income on the Anlage KAP when you file your tax return, and the Finanzamt refunds the difference between what was withheld and what you actually owed after the allowance. Then file the Freistellungsauftrag now so it never happens again.

Frequently asked

Who can file a Freistellungsauftrag? Anyone who is tax-resident in Germany and holds a German bank, savings, or investment account. The order only applies to German institutions — foreign brokers don't process it.

How much is the saver's allowance? Since 2023 the Sparer-Pauschbetrag is €1,000 per person per year, or €2,000 for married couples assessed jointly. Investment income up to that amount is exempt from the 25% Abgeltungsteuer (plus 5.5% solidarity surcharge and any church tax).

What happens if I never file one? Your bank automatically withholds 26.375% on interest, dividends, and realised capital gains from the first cent. You can still reclaim over-withheld tax by declaring it on the Anlage KAP in your annual tax return — but that means waiting until after the tax year ends and filing a return to get it back.

Can I split the allowance across several banks? Yes. You can file a separate order at each bank or broker, but the combined total of all your orders must not exceed your personal cap (€1,000 single, or €2,000 jointly). Allocate more to the accounts where your interest and dividends actually accrue.

Can I change or cancel it later? Yes, at any time through your bank. Changes generally take effect from the next income payment, and most banks let you backdate a new or amended order to 1 January of the current year — but never to a prior year.

Do married couples need a joint order? To use the combined €2,000 allowance you file a joint Freistellungsauftrag, which requires both partners' details. Each partner can also file individual orders up to €1,000 instead — but you can't claim both the joint and individual caps at the same institution.

Dystild isn't a tax advisor — for filings, use a Steuerberater. We map what's accumulating in the background, the decisions with irreversible consequences, and the official sources for every action. Nothing invented.