Abgeltungsteuer

Abgeltungsteuer is Germany's flat-rate withholding tax on investment income. Introduced in 2009, it applies a uniform 25% rate (plus Solidaritätszuschlag and optionally Kirchensteuer) to capital gains, dividends, and interest — regardless of the taxpayer's personal income tax bracket.

How it applies to prediction markets

German tax authorities have not issued specific guidance on prediction market contracts. However, if prediction market gains are classified as capital income (Einkünfte aus Kapitalvermögen), they would fall under the Abgeltungsteuer at the flat 25% rate plus surcharges.

Effective tax rate

The total effective rate depends on your situation:

• 25% base Abgeltungsteuer
• + 5.5% Solidaritätszuschlag on the tax (adds ~1.375%)
• + 8–9% Kirchensteuer if applicable (adds ~2–2.25%)
• Total: ~26.375% to ~28.625%

Günstigerprüfung (cheaper check)

If your personal income tax rate is below 25%, you can apply for Günstigerprüfung — the tax office will use your lower rate instead. This benefits lower-income traders.

Comparison with the US

Unlike the US, where prediction market gains can be classified under four different methods (ordinary income, capital gains, Section 1256, or gambling), Germany applies a single flat rate through the Abgeltungsteuer. The German system is simpler but offers less flexibility — there's no equivalent of Section 1256's 60/40 split or the capital losses carryforward mechanism.

Frequently asked questions

Do I need to report prediction market gains if my platform doesn't report to German authorities?

Yes. German residents are required to report worldwide income regardless of whether the platform issues tax documents. Failure to report is Steuerhinterziehung (tax evasion).

Can I offset prediction market losses against gains?

Capital losses can offset capital gains within the same tax year. Since 2021, losses from certain financial instruments are subject to a €20,000 annual offset limit — check whether prediction market contracts fall under this restriction.