Fund investors should review the liquidity of their settlement accounts ahead of the turn of the year. At the start of January 2027, the respective German custodian bank will automatically collect the tax on the advance lump sum for the year 2026. As a result of the increased interest rate level, noticeably higher tax deductions are expected compared with the previous year, making forward-looking account management necessary.
This necessity is highlighted by Flensburg-based tax consultancy and auditing firm Nielsen & Wiebe & Partner, a member of the HLB network. According to tax advisor and investment expert Marin Burmester, the tax on the advance lump sum is debited directly from the settlement account. If there are insufficient funds, additional overdraft interest charges may be incurred. As investors often only learn the exact amount of the tax burden from the tax certificate received in early 2028, corresponding reserves should be established early.
Mechanism and interest rate basis of the advance lump sum
For tax purposes, the advance lump sum for the 2026 investment year is deemed to have accrued on 4 January 2027. The calculation is based on the base interest rate, which had risen to 3.2 per cent as at the reference date of 2 January 2026. The tax applies to notional gains from increases in the value of investment funds that make little or no distributions, which also includes exchange-traded funds (ETFs).
The levy is not an additional burden, but an advance payment towards future capital gains. The advance lump sum is credited upon the sale of fund units and then reduces the applicable final withholding tax. Depending on the fund's investment focus, partial exemptions apply to investors: these apply to real estate funds, mixed funds, and equity funds, for which the exemption rate is 30 per cent. If the actual performance falls short of the calculated base return, only this lower increase in value serves as the assessment basis.
Rules for subsequent capital losses
If units are subsequently sold at a loss, the tax authorities do not refund the previously paid tax directly. However, as Marin Burmester explains, the tax-relevant capital loss increases by the earnings previously taxed on a notional basis via the advance lump sum. This recognised loss can subsequently be offset against future gains from other securities sales.
Investors should consider the interaction between the base interest rate, fund type and custody account liquidity in detail before the due date on 4 January 2027 in order to avoid unnecessary account costs caused by overdraft interest.
