Tax-Free Dividends in Germany: An Overview
In Germany, there are more than 20 publicly listed companies that plan to distribute their dividends completely or partially tax-free from capital reserves in 2025. This phenomenon is particularly attractive to investors as it directly impacts the return. Here are some important aspects and companies that are relevant in this context:
Why are tax-free dividends attractive?
- Increased liquidity: Tax-free dividends are paid without tax deductions, meaning investors can receive and use the full dividend payout without a portion being withheld by the tax authorities.
- Long-term tax exemption: If shares were purchased before 2009, the dividends can actually remain tax-free since the flat-rate withholding tax does not apply.
How do tax-free dividends work?
- Capital reserves: Tax-free dividends are often paid from capital reserves that have arisen through capital increases or deposits. This distinguishes them from regular dividends, which are paid from profits.
- Taxation upon sale: Although the dividends themselves are tax-free, they may reduce the acquisition costs of the shares. This can lead to taxation upon the sale of the shares unless the shares were acquired before 2009.
Examples of companies with tax-free dividends
- Deutsche Telekom: Deutsche Telekom plans to distribute its dividends tax-free, making it attractive for investors.
- Freenet: Freenet is also among the companies that pay tax-free dividends.
- Jost Werke SE: The commercial vehicle systems manufacturer plans to distribute a dividend of 1.50 euros per share in May 2025.
Important considerations for investors
- Saver’s allowance: Investors should note that the saver’s allowance (1,000 euros for singles, 2,000 euros for jointly assessed) needs to be exhausted before the flat-rate withholding tax applies.
- Long-term strategy: A long-term investment strategy can be sensible to benefit from tax-free dividends, especially if shares were purchased before 2009.
In summary, tax-free dividends provide an attractive opportunity for investors to maximize their returns. However, it is important to understand the tax implications and long-term strategies to fully leverage the potential of these investments.