Advance Distribution ETF 2026: Calculation, Amount, and Tax Deduction Explained

The advance distribution ETF 2026 is an annual minimum taxation on accumulating funds, anchored in the Investment Tax Act since 2018. For 2026, the base interest rate rises to 3.20 percent, the highest level since introduction.

With an accumulating equities ETF worth 50,000 euros, this results in approximately 206.76 euros in tax, due in early January 2027. The depositary bank automatically debits the amount.

What is the advance distribution?

The advance distribution is not a separate type of tax, but a notional income value. The tax authorities levy capital gains tax on this value. The rule is anchored in § 18 InvStG, in effect since January 1, 2018.

Its purpose: Even those who hold accumulating investment funds, i.e., shares without regular distributions, pay a minimum amount of capital gains tax every year.

Without this rule, investors could defer the taxation of their gains for decades, until selling their shares. The Investment Tax Act prevents exactly this tax deferral effect.

Important for your planning: When you later sell the fund shares, all advance distributions already paid are credited against the sale gain. Double taxation does not occur.

When is there no advance distribution?

The advance distribution does not always apply. It is waived in clearly defined cases, and this can significantly reduce your tax burden. Three situations are crucial:

• The fund records a price decline over the calendar year. With negative value development, no advance distribution is levied.
• The base interest rate is negative, as in 2022 with minus 0.05 percent. In such years, there is no advance distribution.
• The actual value appreciation falls below the base return. Then the lower amount is used.

The advance distribution can never be negative. It is always capped by the actual value increase. If you make no gain on your shares in the current year, you pay no advance distribution for that year.

The base interest rate 2026 as a key metric

The base interest rate determines the amount of the advance distribution. The Federal Ministry of Finance sets it annually, derived from the yield of long-term government bonds based on the interest rate structure data of the Deutsche Bundesbank. For 2026, a base interest rate of 3.20 percent applies (BMF letter of 13.01.2026).

The base return is 70 percent of the base interest rate, for 2026 therefore 2.24 percent. The development over recent years shows the significant increase:

• 2023: Base interest rate 2.55 percent, base return 1.785 percent
• 2024: Base interest rate 2.29 percent, base return 1.603 percent
• 2025: Base interest rate 2.53 percent, base return 1.771 percent
• 2026: Base interest rate 3.20 percent, base return 2.240 percent

The value of 3.20 is thus the highest since 2018. For investors, this means: The advance distribution rises noticeably compared to the previous year because the base interest rate has climbed from 2.53 to 3.20 percent. This increase of 0.67 percentage points compared to the 2.53 percent of the previous year directly impacts the tax due.

How is the advance distribution calculated?

The calculation follows a fixed formula. The starting point is the first redemption price of the calendar year, i.e., the value at share acquisition at the start of the year. This is multiplied by 70 percent of the base interest rate. The result is the base return.

From this value, you subtract step by step:

1. the distributions during the year,
2. a 1/12 of the base return for each full month before share acquisition,
3. the partial exemption depending on the fund type.

What remains is the taxable advance distribution. The capping rule is crucial: the base return and the actual value appreciation are compared. The lower of the two values counts. If the redemption price rises only slightly, the advance distribution remains small.

Sample calculation for an accumulating equities ETF

A concrete calculation example makes the advance distribution ETF 2026 comprehensible:

• Fund value on 01.01.2026: 50,000 euros
• Value appreciation until 31.12.2025 calculated for the following year: 4,000 euros
• Distributions: 0 euros
• Base return: 50,000 × 3.20 % × 70 % = 1,120 euros

Since the base return of 1,120 euros is below the value appreciation of 4,000 euros, the advance distribution is 1,120 euros. After deduction of the 30 percent partial exemption for equity funds, 784 euros remain taxable.

At a tax rate of 26.375 percent, this results in approximately 206.76 euros in tax, due in January 2026 calculated for the following year 2027. If the fund value on 31.12.2025 had risen by only 500 euros, the capping would result in a significantly lower amount.

If you apply the same pattern to a larger portfolio, the effect of the higher base interest rate becomes clear. At 60,000 euros fund value and full value appreciation, the base return is 1,344 euros. After the 30 percent partial exemption, 940.80 euros remain, which at 26.375 percent amounts to approximately 264 euros in tax. Without the exemption order, the bank would debit these 264 euros directly.

Partial exemption: What does it mean for your taxes?

The partial exemption is an offset for the fact that funds at the level of their returns already bear tax burdens. A fixed percentage of your gains remains tax-free. How high this exemption is depends on the equity share of the fund.

• Equity funds (at least 51 percent equity share): 30 percent partial exemption
• Mixed funds (at least 25 percent equity share): 15 percent partial exemption
• Domestic real estate funds (at least 51 percent real estate): 60 percent
• Foreign real estate funds: 80 percent

The partial exemption applies both to the advance distribution and to distributions and the sale gain upon sale.

A broadly diversified equities ETF thus benefits in two ways: it typically meets the 51 percent threshold and secures the full partial exemption of 30 percent on all capital gains. A mixed fund with around 30 percent equities, on the other hand, lands at only 15 percent, a pure bond fund at zero.

Why the partial exemption exists at all

Before 2018, foreign dividends and other fund gains were sometimes treated differently. With the reform of the Investment Tax Act, the fund itself pays a corporate tax of 15 percent on domestic dividends.

The partial exemption offsets this tax burden for the investor. Without it, there would be economic double taxation of the same gains. This affects both pure equities investment funds and mixed funds and real estate funds.

Tax rate, capital gains tax, and due date for advance distribution ETF 2026

Capital gains tax is levied on the taxable advance distribution. The total rate comprises 25 percent capital gains tax plus 5.5 percent solidarity surcharge on it. In total, this results in a total burden of 26.375 percent. Those liable for church tax pay additional church tax.

The solidarity surcharge on the capital gains tax was not abolished for capital gains, so it continues to apply in full. Therefore, the effective rate of 26.375 percent remains the relevant calculation base.

The advance distribution for 2026 is deemed to have accrued on the first banking day of the following year, i.e., on January 4, 2027. Only then does it become tax-relevant.

The depositary bank assumes the complete calculation for a domestic deposit and remits the tax directly to the tax office. You do not need to declare these capital gains yourself; the tax office receives the data automatically.

The debit from the settlement account

The debit of the tax is made from your settlement account. This is exactly where the most common pitfall arises: if there is insufficient funds in your settlement account in January, the bank cannot debit the amount due. As a result, it may sell shares or demand additional payment.

Therefore, ensure sufficient coverage by year-end. Many investors are surprised when an unexpected debit occurs in January and do not understand the connection.

Check your tax assessment and your annual tax certificate; the advance distribution appears separately there. In your next tax assessment, you can also verify how the tax was credited.

Use saver's allowance and exemption order

The saver's allowance is your most important tool to make practical progress on saving taxes on equities and funds. It is 1,000 euros per person, 2,000 euros for joint assessment. Up to this limit, your capital gains remain tax-free.

For a married couple with a combined exemption of 2,000 euros, the advance distribution of 784 euros calculated above remains completely tax-free as long as no further capital gains occur. Those who take saving taxes on equities strategies seriously deliberately tap into this amount.

For the bank to automatically consider the saver's allowance, you need an exemption order. Without this order, it will debit the tax on the full advance distribution, even if your exemption has not yet been exhausted. Practical tips:

• Distribute the exemption order sensibly across multiple banks if you operate multiple deposits. With two deposits, you can split the total into, for example, 700 and 300 euros.
• An exemption order can also be placed for children with their own deposit.
• An exemption order can be adjusted during the year; you can increase it retroactively.

Loss offset and foreign deposit

If your fund later incurs losses, the paid advance distribution is not directly refunded. Instead, it increases the tax-recognized loss in the offset pool.

This loss offset later reduces your gains from other equities or investment funds. With multiple deposits with different profit and loss positions, a review via your tax return is worthwhile.

It is different with an ETF in a foreign deposit without German tax reporting. Then you must calculate the advance distribution yourself and declare it in your income tax return.

The capital gains belong in Schedule KAP of your income tax return. Tax software helps with correct entry, as do freely available calculators that determine the base return and the tax due. Many income tax programs now automatically perform this calculation.

The role of the fund company and your bank

The fund company provides the data on redemption price and distributions. Your domestic bank uses this information, performs the calculation, and handles the debit. For most private investors, the taxation thus remains largely in the background.

Concrete tax tips for your investment: maintain liquidity on your settlement account by year-end. Submit an exemption order before the first debit occurs.

Keep an eye on your annual tax certificate to track your capital gains. Further tax tips for long-term investing help put the annual burden of approximately 0.33 percent of fund value into perspective and select the appropriate tax software for your situation.

How high is the tax on ETFs from 2026?

For a typical accumulating equities ETF, 2026 results in an effective burden of approximately 0.33 percent of fund value, before crediting the saver's allowance. This figure results from the base return of 2.24 percent, the 30 percent partial exemption, and the rate of 26.375 percent.

With a portfolio of 100,000 euros and full value appreciation, the tax lands at approximately 354.20 euros. This 354.20 euros results from the base return of 2,240 euros, less partial exemption, taxed at the effective rate. At 150,000 euros, the burden is correspondingly higher.

Those who only save with an ETF savings plan and have submitted the exemption order often pay no tax on the advance distribution initially.

Only when your total returns from equities, dividends, and capital gains exceed 1,000 euros (or 2,000 euros for joint assessment) does real taxation apply. This makes ETF taxes predictable for small investors over many years. Even the mentioned 354.20 euros can often still be offset with a combined exemption of 2,000 euros.

For savings plans: proportional calculation per purchase date

With monthly savings rates, the calculation becomes more complex. For each purchase date, the 1/12 rule applies: per full month before share acquisition, the base return is reduced proportionally.

A share purchased in July carries only half the base return for that year, one purchased in October only a quarter. If you invest 500 euros in December, it contributes almost nothing to the annual advance distribution. The domestic bank automatically handles this apportionment, so your tax burden is precisely aligned with your actual holding period.

The essentials of advance distribution at a glance

The advance distribution affects more investors in 2026 due to the base interest rate rising to 3.20 percent than in previous years, when the rate was still 2.53 percent. Those who understand the mechanics of partial exemption, the settlement account process, and the effect of the saver's allowance keep their ETF taxes under control.

An exemption order submitted promptly and sufficient funds in your settlement account are sufficient in most cases to handle the annual tax smoothly. The base interest rate of 3.20 percent remains the central metric on which the entire return calculation after taxes is based.