Trade Republic Vorabpauschale

M

mmclo

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Pretty sure this is not for Irish Residents so wondering why I got it by email?

Hello MMCLO,


German law requires us to process the tax payment on Vorabpauschale for ETFs and investment funds that gained value in 2025. This payment will be processed in mid-January.

We use your 2026 exemption order or loss pots first. If these are not enough, the tax is deducted from your cash. Please ensure you have sufficient funds available this month. We will contact you if your cash balance is not enough.

You can find the detailed calculations in our Help Center. Trade Republic does not provide tax advice.
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Interesting nonetheless how Germany handles accumulating funds. Rather than taxing a deemed disposal, they tax a deemed interest return that you could otherwise have earned.

The German investment tax reform (2018) introduced the advance lump sum (Vorabpauschale). This ensures that all ETFs, whether they pay out dividends or reinvest them, are taxed equally. It is a tax on unrealized gains, calculated every January for the previous year.

How the taxable amount is calculated

The taxable amount is based on a "base return" that represents a deemed profit for the year. To calculate this, we use:

  • The fund value at the start of the year.
  • The base interest rate set by the Deutsche Bundesbank (2.53% for 2025).
  • A government-defined factor of 0.7.
If your ETF's actual increase in value is lower than the base return, the actual value increase is used as the taxable amount. If your ETF value did not increase or you received distributions (dividends) that exceeded the base return, no Vorabpauschale is due.

Base return explained

Base return = ETF Value at start of 2025 × 2.53% × 0.7

For an ETF worth €10,000 at the start of 2025: €10,000 × 2.53% × 0.7 = €177.10 (Base return)

Depending on the fund type, a partial exemption (Teilfreistellung) reduces the taxable amount:

  • Equity funds: 30% tax-free (€123.97 is taxed).
  • Mixed funds: 15% tax-free (€150.53 is taxed).
  • Other funds: 0% tax-free (Full €177.10 is taxed).
If you bought the ETF during 2025, the amount is reduced by 1/12th for every full month you did not hold it.
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Yeah, from a cursory glance it looked like a better system.

I have Ireland clearly as my "country ID" so can't see why I got it. I had to upload a passport when opening I think and definitely entered PPS no.

Have read online that you have to clearly inform you're provider of your country of residence to be exempt so hoping that process and "country ID" covers that

Will be very poor form if not and that their system can't do that and emails everyone. As always impossible to contact a human
 
German investors curse the Vorabpauschale because it was only introduced in 2018. Before that we didn't pay any tax on shares or funds during the growth phase, only on actual disposal would CGT (Abgeltungssteuer) be due, if a profit was made. German investors don't know how easy they have it compared to say Ireland.
 
Got this also this morning. Their Customer Service is awful. Left a message on their help line. Will let you know how I get on. Just wondering if they proceeded and take the tax I assume that the tax deduction can be claimed in Ireland in any event. Double taxation etc.
 
Double taxation wouldn't apply because it's on the part of Trade Republic, nothing to do with the German Revenue.

The email was probably sent en masse in error, but the tax only deducted for German customers.
 
Its a tax for German residents only. They have rather cack handedly sent out a blast of these mails to every nationality who have an ETF on Trade Republic instead of just filtering to German customers.

Given my experience with Trade R this doesn't surprise me.

*Edited to correct spelling error.
 
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If they do deduct it I can only see a tortuos road of pain, bots, "not mein job", shrugs etc etc trying to resolve it :-(
 
I actually got a complaint closed because " I only speak German and English so cannot process your query"
 
Ive found it so hard to contact them on this that it has made me rethink putting any more money with them. I dont really want to be faffing around when I need help with something in future and this experience3 has shown me not to be dealing with this shower anymore. I had a similar issue that made me not use revolut since.
 
Got this reply from Trade Republic this morning.
"We recently sent you a mail about an upcoming tax event for ETFs and investment funds (Vorabpauschale). This mail has been sent to you in error.

According to our records, you are not a German tax resident. Therefore, this tax does not apply to you. Your ETF and investment fund holdings will not be subject to this tax. No action from your side is required.

If you have further questions about your holdings, our support team is available via chat."
 
So it is possible to get through!

When I used the chat it didn't even indentify the word "Vorabpauschale"
 
Maybe some of the other competitors to TR (with better customer service) will open accounts for Irish residents. I'm going to move to Trader's Place to take advantage of their €0 fees for trades over €500. TR is still charging €1 for every trade:


TR is not really moving with the times IMO. The identification process for most banks these days allows me to use my ID card held to the back of my phone. No video chat nonsense. TR still only allows video chat identification. Even Deutsche Bank (got a new credit card from them yesterday) allows eID+phone. TR is the only neo-broker solely reliant on the AI chatbots according to that comparison list!
 
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