Teilfreistellung: why only 70 % of equity ETF income is taxed in Germany
Teilfreistellung (partial exemption) is the share of income from an investment fund that is tax-free in Germany (§ 20 InvStG). For private investors it is 30 % for equity funds, 15 % for mixed funds, 60 % for real estate funds and 80 % for funds investing mainly in foreign real estate.
Also: partial exemption · Teilfreistellungsquote · Aktienteilfreistellung
If you hold ETFs or other investment funds as a private investor in Germany, you are not taxed on all of their income. A fixed share stays tax-free, and its size depends only on what the fund invests in according to its fund rules. The law calls this Teilfreistellung (§ 20 InvStG). Status: October 2026.
The rates
| Fund type | Condition (§ 2 InvStG) | Tax-free for private investors |
|---|---|---|
| Equity fund (Aktienfonds) | fund rules require more than 50 % in equities at all times | 30 % |
| Mixed fund (Mischfonds) | at least 25 % in equities at all times | 15 % |
| Real estate fund | more than 50 % in real estate | 60 % |
| Foreign real estate fund | more than 50 % in foreign real estate | 80 % |
| Other funds, such as bond ETFs | none | 0 % |
Business investors get higher equity-fund rates (60 % for individuals, 80 % for companies). What counts is the fund’s investment rules, not its name: a “multi-asset” fund can be a mixed fund or have no exemption at all.
What it applies to
All fund income (§ 16 InvStG): distributions, the yearly Vorabpauschale and gains on sale. For an equity ETF without church tax, this gives an effective rate of 70 % × 26.375 % = 18.46 % on every euro of income once your saver’s allowance is used up.
The flip side: losses and costs from such funds only count in the same proportion (§ 21 InvStG). A €1,000 loss on an equity ETF reduces your taxable income by only €700.
Examples for 2026
Sale: you sell equity ETF units with a €10,000 gain. €7,000 is taxable. With the allowance already used, the tax is €7,000 × 26.375 % = €1,846.25. The same gain on a bond ETF would cost €2,637.50.
Vorabpauschale: an accumulating equity ETF is worth €10,000 on 1 January 2026 and rises by more than €224 during the year. The base return is €10,000 × 3.20 % base rate × 70 % = €224 (§ 18 InvStG). 30 % of that is tax-free, leaving €156.80 taxable. Without an exemption order, the bank debits €41.36 in January 2027.
Common mistakes
- Going by the fund name. What counts is the minimum equity share in the fund rules.
- Reading the 30 % as a tax discount. It reduces taxable income, not the tax, but the result is the same: 30 % less tax.
- Assuming single shares get it. Dividends and gains on individual shares get no partial exemption; they pay the full Abgeltungsteuer.
- Counting losses in full. Losses on partly exempt funds only count in part.
In your plan
The partial exemption is one reason equity ETFs held privately are taxed more lightly than the headline 26.375 % suggests. For long-term planning, the effective rate of about 18.5 % on gains is the number to use. The ETF savings plan calculator applies it automatically to equity funds, and the Vorabpauschale calculator shows what is debited in January.