In 2021, day trading in Germany will be dead

Many who leave germany will come back if health is decreased.

Bad news again from Olaf

https://www.onvista.de/news/scholz-v...euer-354327009

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https://www.leetchi.com/c/verfassungsklage

To clear a few things up. The new law does not apply to CFDs/Forex, but to futures, options, FX forwards and similar instruments that come with a time constraint (it clearly states Terminkontrakte for a reason). Even though the legislator has not made itself sufficiently clear here, Forex is typically not seen as a Terminkontrakt but either a CFD (contract for difference) or Kassa market (depending on the specifics between your broker and you). Well, while the whole thing is a stupid change of tax law and the way Scholz hid it deep in the income tax law to push it through is something I detest, I can't say I'm surprised because Scholz is a man who says he has all his savings in personal savings accounts. No wonder that Germans are world champions at saving, but still have comparatively few wealth. While I'm fully aware that there are other things involved here and it is generally a little more complex to decide what to count as assets in international wealth comparisons (pension claims, etc. are often overlooked), it is still telling to view this issue from the savings angle. Anyway, I digress.

I do, in any case, also question whether the whole change is in conformity with the law. To my knowledge, full taxation of the profits without full crediting of the losses has already been rejected by courts in other previous cases.
By the way, a direct right to tax on broker accounts outside Germany is absurd and due to the EU single market every broker somewhere in the EU can offer his services legally also to German customers. So I wouldn't worry with that and on a side note: German brokers? If you can hear someone laughing, that's me, all the way from sunny Malta. Germany barely has brokers and even if brokers are leaving the UK, they're much likely to set up shop in Cyprus or Ireland.

Anyone in Germany who still wants to reduce their tax burden should find out whether the so-called Vermögensverwaltende GmbH (a GmbH you use as a vehicle to manage your wealth) also applies to gains from currency transactions. Firstly, the change in the law does not apply to a GmbH at all, as it can only be found in the private income tax law, secondly, operating expenses can generally be deducted more generously here, which reduces the tax base. All good things are three, only 5% of rate gains are taxed in the GmbH, although I cannot say with certainty whether this also applies to currency transactions because I left Germany in 2014 and only use those constructs for the rental properties I own back "home". However, keep in mind that your profits are then owned by the company and taking them out is taxed as ordinary capital gains. Even though this is annoying, it can still be very tax-efficient especially if you're still reinvesting previous profits.

For those who want to reduce their tax burden by moving away, Malta could be an option. I trade via a company here in Malta, which in turn belongs to a holding company outside of Malta. Malta has the highest and lowest corporate tax rate in the EU. The Maltese company pays 35% tax and distributes all the rest to the parent holding company. The parent company can now reclaim 6/7 of the tax paid by its Maltese subsidiary from the Maltese tax authorities, effectively reducing the tax burden to 5%, even though the refund takes 4-6 months. Since I live in Malta as a non-dom using which was called the HNWI scheme and is now known as the special tax treatment under the Malta residence program, I am also subject to more interesting tax laws with my personal tax matters. I have to pay at least 15 000 Euro per year, but I only pay tax on the profits I remit into Malta with 15% but those I collect on foreign accounts are not taxed at all. In a nutshell, this all boils down to an environment where I pay only 5 % on all my trading profits to the taxman and (usually) only the first 100 000 € with 15%, save for the years in which I want to buy a new car here in Malta or similar higher expenses.

By the way, financial transaction taxes have no relevance for Forex traders either. Firstly, EU law makes taxation of currency flows impossible (free flow of capital, goods and people), and secondly, the crap that Scholz was talking about only concerns stocks anyway. With a bit of luck, this will now be buried under Corona and soon the SPD will be out of the picture anyway.

Very interesting analysis. When moving from the US I also looked at Malta but decided to live in Cyprus instead. Living in Europe is very advantageous for Americans since the first $106K is tax free. Also Cyprus doesn't tax capital gains on stock/forex profits so, like you, I pay very little income tax. Living in the US I was taxed on all stock/forex profits as normal income unless I held the asset for more than a year. Forex traders don't hold positions opened for a long time although I had a trade opened for more than 2 months.

Yes, Cyprus is another similar option and is, indeed, often prefered by traders but I also had other reasons to prefer Malta and generally like their Non-Dom implementation quite a lot. On top of that, most low-tax stuff here was pushed through by a Labour government but seems to be unquestioned by the opposition as well and the country's economy has become dependent on this, making it very unlikely to disappear.

To explain the special tax treatment: I pay 15 % on income I remit into Malta with a minimum of 15k annually, I do not even have to tell the tax authorities of money I receive elsewhere (as in non-Maltese bank account) and I can remit capital gains from elsewhere (like foreign stocks, dividends) freely into Malta. There are plenty of tax specialists here on Malta, even many Germans and British ones. Funny thing, one of the guys who worked for my London tax firm now works here in Malta as well. This whole can even work out better than living in Monaco because Malta, just like Cyprus I presume, has better tax deals with other countries when it comes to gains that are often taxed at the source like dividends. Generally speaking, there is a trend in ordinary high-tax countries becoming very tax-efficient but not so blatantly that other countries would treat them as tax havens. Greece recently passed a non-dom similar tax law to introduce a lump sum of 100k annually for the first 15 years of new tax residents limited to foreign earned income. While this is typically not an option for traders working from Greece because it is practically impossible to set your trading up as a foreign-sourced income (no, broker location doesn't matter), it is, for example, a retirement option for rather big dividend recipients and proofs the point as Greece was only one of many in recent years. The key thing nowadays is to look at tax planning rather than tax rates, this allows these new havens to fly under the radar as much as necessary.

JensG, some of your interpretations of the new rules in Germany are calling for trouble!! Just updated your information. Your advice might be helpful, if you are already off records taxwise in Germany.

Kind regards from a long term expat who left CH after 20 years due to high taxation of my kind of trades

What interpretation do you mean exactly? The Federal Office of Finance itself stated in earlier letters that Forex is not considered to be a so-called Terminkontrakt and their explanations always pointed towards the timing character of instruments like Futures, Options, FX Forwards and the like.

I`m not aware of any written official statement since this law was passed that confirms cfds and forex to be exempt from the adverse effects.

All laywers, tax advisors and traders wait for these clarifications by the "Durchführungsverordnung". If you have different citations from the last quarter - let me know.

Thanks


Ps.: https://www.vab.de/wp-content/upload...BMF_160320.pdf

You are wrong, see here: https://www.vab.de/wp-content/upload...BMF_160320.pdf


Der Begriff des Termingeschäfts umfasst sämtliche als Options- oder Festgeschäft ausgestaltete Finanzinstrumente sowie Kombinationen zwischen Options- und Festgeschäften, deren Preis unmittelbar oder mittelbar abhängt von

 dem Kurs von Devisen oder Rechnungseinheiten

Forex, whether CFD or spot market is neither an Options nor Festgeschäft. What the PDF describes is, for example, a FX option or a FX forward contract. The first one is already implied by its name, it is an option whose price depends on the currency market. The second one is a forward contract, these are what in Germany is known as a Festgeschäft. Both have the time-constraint in common typical for everything that is a Termingeschäft.

I respectfully disagree: It´s the derivatives they are after, derivatives which are considered to be the devil in disguise, weapons of mass destruction, by the german society and both political blocks. The law was passed in a bipartisan coup d`etat.

In my country, the US, derivatives were one of the main reason for the 2008 crash. Even today derivatives are used to "package" many different financial assets including junk corporate bonds and sub-prime mortgages. Each of these bonds or mortgages would sell at a huge discount because of their low individual rating and the inherent financial risks of holding them in holding them in a portfolio. By packaging them they become "so called less risky" because of diversification and therefore get a higher credit rating. Derivatives need to be banned in all countries and I hope that most will follow the German lead.

fully disagree.

we wait until the next set is waved through after the federal election
then the tax rate will rise to 32% plus solos
no one can slow down like the rising price of electricity or gasoline
Long live democracy 709 members of parliament determine over 84 million citizens in Germany

To be expected. All kinds of maneuvering going on to raise money for the bailout.

The PDF
https://www.vab.de/wp-content/upload...BMF_160320.pdf
says clearly that also CFDs are covered by this new law. Forex is not covered. When you trade with a CFD Forex Broker ( like FXCM ) this might be a problem. Indextracker on SPX or Ger30 are also CFDs and a problem, but not so ETFs on Indeces as far as I understand the subject.

Be happy since Germany is solvent unlike my country, the US, that is totally insolvent and will not go bankrupt until the $ will cease to be the reserve currency of the western world. Many think that this won't happen but others think that we are on our last leg and that it could happen any time.

edit 201010
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important
https://www.godmode-trader.de/artike...anders,8478516

Herzlichen Dank.