Corporate entities can likewise apply for exemption certificates
Exemption certificates provide the possibility of avoiding tax deductions on capital gains from financial investments. The following analysis examines the benefits of exemption certificates and describes the conditions that are necessary for obtaining them.
What are exemption certificates?
Capital gains from financial investments (dividends, distributions and similar income) are normally subject to capital gains tax plus the solidarity surcharge (in total, where applicable, a tax burden of 26.375%). The tax is usually deducted directly at source and applies to the realised gains. This automatic deduction can be avoided, in certain cases, through the correct use of exemption certificates. These are official documents that can be used in tax matters to confirm to certain individuals or companies that they are exempt from legally standardised tax deductions or advance tax payments. Such a certificate can improve liquidity and simplify processes.
Exemption in the form of a non-assessment certificate
For people whose overall income is very low, a non-assessment certificate (Nichtveranlagungsbescheinigung) provides a way of completely avoiding capital gains tax being levied. The certificate leads to a situation where the holders do not have to submit a tax return if they have no other taxable income. You can apply to the local tax office for such a certificate.
The advantage of a non-assessment certificate is that income below the level of the personal tax allowance would not be subject to tax. In Germany, the annual personal tax allowance is €12,348 (as per 2026). However, if capital gains from financial investments are generated, then these would normally be subject to withholding tax charged at an overall rate of 26.375%.
No tax would be deducted if there was a non-assessment certificate because it confirms that the recipient of the capital gains does not owe any tax within the framework of the income tax tariff. This is particularly advantageous if the securities accounts of parents can be transferred to under-age children. Tax-exempt capital gains can be produced here as long as the children themselves generate no proceeds from additional types of income (such as, for example income from employment).
Avoiding the tax deduction in the case of operating income and "permanent overpayers"
For specific corporate entities (e.g., a GmbH [a German limited liability company]) there can be situations where the amount of capital gains tax plus the solidarity surcharge is higher than the corporation tax and/or trade tax that will actually be due. The reason for this is that capital gains are taxed at a flat rate (please see above) while the effective tax rates charged for corporation tax and trade tax can be lower, especially if parts of the income from investments are tax exempt.
In the case of corporations, tax exemption for certain investment income is regulated in Section 8(b) of the German Corporation Tax Act. Accordingly, dividends and other income from shares in (German) domestic or foreign corporations are 100% tax exempt (if certain requirements are met, especially as regards the size of the shareholding). Just 5% of the income is treated as non-deductible business expenses and is subject to corporation tax and trade tax. Despite this extensive tax exemption, the income is initially subject to capital gains tax that, where applicable, can be claimed back as a tax overpayment within the scope of a tax assessment.
In order to avoid this tax charge, it is possible to apply for an exemption from capital gains tax, then if appropriate, this will ensue via a certificate from the local tax office. This will confirm that, in view of the tax situation at the corporate entity, no tax, or a lower tax rate will be incurred in the assessment. The certificate will be issued for a period of up to three years, although it can be revoked if the tax situation of the corporate entity changes.
In order to benefit from an exemption certificate, the business activities need to be structured in a way so that the corporation tax and trade tax that are due are permanently lower than the amount that was previously withheld within the scope of capital gains tax plus the solidarity surcharge. This condition must be clearly satisfied so that the local tax office can grant the application.
