Tax exemptions
The Investment API enables you to manage tax exemption orders for your users digitally and programmatically. We currently offer this functionality for tax exemptions under German tax law, i.e. for users who are resident in Germany for tax purposes.
If a valid tax exemption order is received, Upvest will not withhold German withholding taxes ("Abgeltungssteuer") for capital gains and income up to the amount specified in the tax exemption order for the period in which the order is valid.
Please note that the tax exemption feature is only available in Germany.
Tax exemption orders that are indefinite or do not expire at the end of the calendar year are automatically carried over to the next year in our Investment API. Read more about auto-renewal in the Auto-renewal of tax exemptions chapter.
German tax law
In accordance with Section 20 (9) sentence 1 EStG, a total of EUR 1,000 per year and tax resident (EUR 2,000 for married couples) is exempt from capital gains tax. This tax exemption is recognised by supervised institutions if an exemption order has been issued.
Legally speaking, an exemption request can be issued digitally or in paper form. In the context of our API, we focus on exemption requests that are submitted exclusively digitally via the Investment API.
The Investment API currently supports German tax exemptions for single users with a maximum tax allowance of EUR 1,000 per user per year.
How does tax exemption work?
The Investment API supports a single permanent tax exemption per user per year.
Upvest will extend its tax exemption functionality for the German jurisdiction by offering tax exemptions for married couples. This extension enables higher tax allowances (EUR 2,000 instead of EUR 1,000 for singles) and a more tax-efficient allocation of tax allowances between couples.
Allowed modifications
In the course of a tax year, changes may be requested by the user. These are permitted at any time, subject to certain restrictions.
Reduction
A reduction of an existing tax exemption may be made at any time during a tax year, provided that the new target amount of the tax exemption is greater than (or equal to) the amount already utilised.
Information about the quantity utilised is provided via the corresponding webhook events.
Increase
An existing tax exemption can be increased up to the maximum tax-free amount at any time during a tax year.
Cancellation
The cancellation of a tax exemption within a specific tax year can only be accepted if the user has not yet utilised any of the current existing tax exemption amounts. Otherwise, a complete cancellation of an exemption can only be supported for the next tax year. However, the user is free to reduce the tax exemption amount to the amount already used.
An important limitation for the modifications to the tax exemptions is that Upvest combines multiple tenants from different clients under its own banking licence. This means that a user representing a single natural person (with a single Tax Identification Number (TIN)) could potentially coexist in multiple tenants.
In this case, Upvest guarantees that the existing maximum tax-free allowance (i.e. EUR 1,000 for single persons) will not be exceeded. To prevent that a single natural person can file a tax exemption order which exceeds the maximum amounts. Upvest will accept incoming tax exemption orders on a “First-come / First-serve” basis, i.e. the send incoming tax exemption order for a user, who already holds a tax exemption with Upvest, will be rejected.
Next steps
If you would like to know how a tax exemption request is processed via the Investment API, go to the Use cases chapter. of this guide.
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