Saver's Lump Sum Allowance: Who Qualifies and What You Get
Learn how to protect your investment earnings from tax by using the Saver's Lump Sum Allowance for your capital gains.
The Saver's Lump Sum Allowance is a tax rule that allows you to earn a certain amount of profit from your investments without having to pay tax on those gains.
Who it's for
This is for all private investors who earn money from capital gains, such as interest from savings or profits from selling stocks.
What you get
You can earn a specific amount of investment income completely tax-free. For single individuals, this amount goes up to €1,000. For couples, the combined tax-free limit is €2,000.
What it costs you
There is no direct monetary cost to use this allowance, but it does require a small amount of administrative effort. You must submit a specific instruction, known as a Freistellungsauftrag, to your bank or financial institution to tell them how much of your income should be exempt from tax.
The catch to know
The most important thing to remember is that the tax exemption is not applied automatically by the government. If you do not file the necessary form with your bank, the bank is required to automatically deduct a 25% withholding tax (Abgeltungssteuer) from your earnings.
How to apply
- Contact your bank or financial provider.
- Request a Freistellungsauftrag (an exemption order) form.
- Specify the amount of your allowance you wish to apply to that specific account.
- Submit the completed form to your bank.