Fund investors should review the balances of their reference accounts before the upcoming turn of the year. At the beginning of January 2027, the tax on the advance lump sum for the 2026 investment year falls due. German custodian banks automatically deduct this withholding tax from the respective settlement accounts, as the taxable inflow is dated by law to 4 January 2027.
The basis for the tax deduction is the base interest rate, which rose to 3.2 per cent as of the qualifying date on 2 January 2026. As a result of this increase, the tax burden for many investors is noticeably higher than in the previous period. Flensburg-based tax consultancy and auditing firm Nielsen · Wiebe & Partner, a member of the international HLB network, points out that insufficient account cover can lead to avoidable overdraft interest.
System and scope of application of the advance lump sum
The advance lump sum does not represent an additional levy, but functions as an advance payment on future capital gains. It applies to investment funds and exchange-traded funds (ETFs) that made no distributions or only insufficient distributions in the previous year. As tax consultant and investment expert Marin Burmester explains, investors are essentially making an advance payment for taxes that would normally only fall due upon the subsequent sale of the units, which in turn reduces the subsequent tax burden upon disposal.
- —Relevance for holdings: Accumulating or low-distribution investment funds and ETFs are affected.
- —Partial exemptions: Statutory exemption rates apply to real estate, mixed and equity funds; for equity funds, this stands at 30 per cent.
- —Income limit: If a fund exhibits a lower performance than the calculated base income, only the actual increase in value forms the assessment basis.
- —Loss offset: If a subsequent sale results in losses, no tax refund is granted; instead, the disposal loss increases by the advance lump sum paid, to be offset against future gains.
Necessary liquidity provision for investors
The actual amount of the deduction often becomes transparent to many retail and institutional investors only with a considerable time lag. The official tax certificate for the relevant year does not reach account holders until early 2028. To avoid automated debit interest on the settlement account, Burmester therefore advises providing appropriate cash funds in good time.
Investors should use the remaining fourth quarter to analyse their portfolio structure with regard to accumulating fund units. Early coordination with the custodian bank or tax advisor ensures that the amounts due can be settled smoothly in January 2027.
