Your dividend profit declaration in Germany: How Income Tax Act 60/40 rule works for Qualified shareholding

German individuals, who choose to invest and become a hero! By owning more than 1% of a company’s shares, you can benefit from a special tax rule where only 60% of your capital gains are taxed. This means you keep more of your profits and increase your investment returns from the start. Here’s how you as an individual investor can use Germany's rules for Qualified Shareholding to significantly improve your financial results.

What is Qualified Shareholding?

In Germany, having a Qualified Shareholding means you hold more than 1% of a company's shares. This significant stake in a company provides not just the potential for higher returns, but also tax advantages.

Navigating the Requirements

To take advantage of these benefits, you need to meet specific criteria under the Income Tax Act (Einkommensteuergesetz, EStG):
1.    Ownership Threshold: Own more than 1% of the company’s , as detailed in Section 3 No. 40 of the EStG.
2.    Long-term Commitment: Keep your shares for a long time to stabilize your investment and align with sustainable investment benefits.

Why This Matters to You

For CrowdedHero investors, using the German Qualified Shareholding status does more than increase financial returns—it makes a real impact. It gives you the opportunity to support the companies you invest in, promote sustainable growth, and benefit from significant tax advantages. This strategic investment approach not only empowers you as an investor but also supports the startups or established companies you believe in, helping to create a strong community of innovation and success.

We encourage every CrowdedHero investor to aim for Qualified Shareholding status in your next EU investment. Consult financial experts, understand the legal framework, and maximize the return on your investments. Keep following CrowdedHero for more investment insights and opportunities!

Double Tax Treaty agreement Latvia-Germany

The Latvian-German Double Tax Treaty ensures that income earned across both countries isn't taxed twice. It sets out clear rules for taxing various types of income, including dividends, interest, and business profits, and allows for tax credits to prevent double taxation. This treaty supports cross-border investment and provides a stable tax framework for residents and businesses operating between Latvia and Germany.

Practical Example for dividend payout

Suppose you invest through CrowdedHero in an EU-based startup or a mature company looking for growth. If you acquire just over 1% of the company's shares, you reach status which aligns to Qualified Shareholding criteria. If a dividends occurs and you make a €1,000 profit, only €600 of this will be taxed. This structured strategy not only secures your investment benefits but also boosts your financial returns through the 60/40 tax exemption. After applying the foreign tax credit, the German tax resident would only have to pay the solidarity surcharge of €7.92 in Germany. The Latvian SPV tax paid (€200) fully offsets the German income tax liability.