Hey bunqers 🌈,
The Vorabpauschale (preliminary lump-sum) is a tax law in Germany which applies capital gains tax on unrealized gains from your investment funds for the last year. This was introduced by the German Tax Authorities in 2018 to ensure fair taxation on assets, even if the profit hasn’t been realized yet.
If you’re investing with your bunq Stocks account as a 🇩🇪German resident, the Vorabpauschale is applicable to your ETFs. Our partner Upvest will automatically calculate and collect the respective taxes on the Vorabpauschale and pay it on your behalf to the German tax authorities every January, so you don’t have to worry about calculating or setting the money aside.
What's Vorabpauschale?
You can think of it as a small tax prepayment on expected profits from your ETF shares. The total amount taxed as a result of the Vorabpauschale will be deducted from the final capital gains tax liability at the time of your actual ETF sale, preventing double taxation. Here’s how it works.
The amount due for the Vorabpauschale of the previous year is calculated once a year in January of the current year. The taxable amount is based on the value of your ETF shares, a base interest rate set annually by the German Federal Ministry of Finance, and a government-defined fixed factor.
The Vorabpauschale will be automatically paid out by Upvest to the German tax authorities on your behalf by selling a small portion of your ETF to cover the tax due (Sell-to-Cover order).
You’ll never be taxed on more profit than you’ve actually made. The tax is always capped at your real gains for the year.
Vorabpauschale is only applicable if your investments have actually increased in value. If your investments lose value, you won't pay any Vorabpauschale for that year.
How is Vorabpauschale calculated?
The Vorabpauschale is calculated by:
Taking the value of your ETF shares at the start of the past year.
Multiplying it by the basic interest rate, set to 2.53% for 2026 by the Deutsche Bundesbank.
Multiplying the result by the government-defined fixed factor of 0.7 to get the base return.
The base return is adjusted by the amount of the full months you held the ETF for. If you’ve bought the ETF shares on February 15, of the past year, the taxable return is calculated using 10/12th of the annual amount.
An exemption is applied to the total taxable amount if you hold an Equity ETF (30% of your base return is tax-free) or Mixed ETF (15% of your base return is tax-free).
The final amount gets taxed at the Capital Gains (25%) rate and the Solidarity surcharge (5.5%). The effective tax rate may be higher depending on individual circumstances, such as the Church Tax (8-9%)
Example 1: You’ve bought an ETF share worth €1,000 in January, 2025. The ETF’s worth grew to €1,100 by December 31, 2025. This is how the taxable return is calculated:
Base Return (Basisertrag): Take the value of the ETF at the start of 2025 and multiply it by the official interest rate set for the year. In this case, the €1,000 is multiplied by the basic interest rate of 2.53%.
€1,000 x 2.53% = €25.30
The resulting €25.30 is multiplied by the government defined factor of 0.7.
€25.30 x 0.7 = €17.71
Partial exemptions are applied to this amount, if applicable.
Since the calculated Base Return is lower than the ETF shares value increase of €100, €17.71 is the amount which will be taxed at the capital gains rate (25%), solidarity surcharge (5.5%), and Church tax (8-9%).
Example 2: You’ve bought an ETF share worth €1,000 in September, 2025. The ETF’s worth grew to €1,100 by December 31, 2025. This is how the taxable return is calculated:
Base Return (Basisertrag): Take the value of the ETF at the time of purchase and multiply it by the official interest rate set for the year. In this case, the €1,000 is multiplied by the basic interest rate of 2.53%.
€1,000 x 2.53% = €25.30
The resulting €25.30 is multiplied by the government defined factor of 0.7.
€25.30 x 0.7 = €17.71
Since you’ve held the ETF from September 15, 2025, the amount is reduced to 3/12ths.
€17.71 x (3/12) = €4.43
Partial exemptions are applied to this amount, if applicable.
€4.43 is the final amount which will be taxed at the capital gains rate (25%), solidarity surcharge (5.5%), and Church tax (8-9%).
When does Vorabpauschale get deducted?
The Vorabpauschale is charged once per year, before January 31st. This is a legal requirement in Germany, and Upvest processes it on behalf of all eligible German investors.
How is the Vorabpauschale deducted?
The Vorabpauschale is automatically deducted for you each year, so you don’t need to worry about calculating, paying, or declaring it. To cover the tax, our partner, Upvest, uses a simple sell-to-cover process. This means that Upvest will automatically execute a sell order for a small portion of your ETF investments to cover the tax amount due.
To make sure your tax bill is covered, no matter what, Upvest will sell a slightly larger portion of your ETF. This small buffer safely covers:
The Vorabpauschale tax itself
Any minor price changes in the market
The capital gains tax on the portion sold
There are no fees for the order execution of this sale, it consists solely of tax and order amount. The extra amount that was sold to cover the tax will be returned to you. It’ll be deposited back into the account you used to purchase your ETFs within 30 days.
How will I know when the Vorabpauschale is deducted?
We’ll let you know right before the Vorabpasuchale is deducted for you. A couple of days before Upvest sells a small portion of your ETF share on your behalf, we’ll send an email to outline the amount which will be sold and what you can expect.
Do I need to declare the Vorabpauschale?
No, you can sit back and relax! Upvest automatically pays and declares the taxable amount due on your behalf to the German Tax office.
What happens when you sell your investments?
When you sell your investments, the total profit is taxed. But any Vorabpauschale you pay is recorded and will be deducted from the final capital gains tax, whenever you sell your shares in the future. This way, you don’t get taxed twice.