The exemption order is particularly important for your investment income and was increased in 2023. You can apply for this at the bank. We explain what the exemption mandate is, what it does and why it makes sense to apply for it.

The exemption mandate applies to income from capital assets or also called capital income. These are profits you make from an investment. Consequently, you can consist of interest from an overnight money account, savings account or even realized profits from securities, fund distributions or dividends.

The tax deduction shall be waived in accordance with § 44a (1) no. 1, paragraph 2 sentence 1 no. 1 EStG, provided that the capital gains do not exceed the savings lump sum and there is an exemption order of the creditor. If the capital gains exceed the allowance of EUR 1,000 for single persons or EUR 2,000 for spouses, the surplus must be taxed with 25 percent withholding tax plus solidarity surcharge and, if applicable, church tax. In order to claim this allowance, an exemption order is mandatory. You must actively apply for this in order to avoid that taxes are due on the entire capital income and are automatically paid.

Anyone can make the exemption order. Only the tax identification number (tax ID) is required. If you have only one custodial account, the granting of the exemption order is not difficult. The bank offers a form that you must fill out and send. Once issued, you can see in some apps how much you have already consumed from your exemption order.

The exemption order is always valid for an entire calendar year. However, a permanent grant is also possible. Then it is valid until it is either changed by a new order or revoked. Retroactively, however, no changes are possible.

It only gets tricky when you have several depots. Then you have to issue an exemption order separately at each bank and divide it between the different accounts and deposits. Therefore, you need to estimate approximately how much profit you will make where. However, it is important that the total amount of exemption contracts awarded does not exceed EUR 1,000. The tax office checks the exemption orders and punishes violations with an administrative penalty.

You should issue the exemption order immediately upon account opening or custodian opening. However, if this is not available, the bank automatically pays the tax due without taking into account the allowance. Change your exemption order during the year so it is possible to get refunded withholding tax already paid. Upon account termination, you must additionally order the deletion of an exemption order so that no unused allowance remains.

If you have forgotten the exemption order, you can recover the overpaid tax by income tax return. However, this route is much more complicated and requires waiting for the tax assessment. Only then will you get back too much money paid. It is therefore worthwhile to go the much less complicated way of the exemption order. We therefore recommend that you request the exemption.