Please note, this article is for informational purposes only, and does not constitute tax advice. At Capital.com, we are not tax advisors. If you have any specific questions, we strongly recommend consulting a qualified tax professional.
Introduction
In 2021, Germany introduced a tax law limiting the offset of losses from CFD (contract for difference) trading against gains to a maximum of €20,000 per year. The law was introduced on 18 December 2020, with effect from 1 January 2021.
This rule caused significant financial strain on retail traders who could not offset larger losses, even if their overall CFD trading resulted in losses. As a result, it negatively impacted the German CFD trading market, causing a decline in participation by retail investors.
Impact of the 2021 rule
The 2021 regulation meant that while traders could offset up to €20,000 in losses per year, any excess losses could not be carried forward or offset against future gains. This approach disproportionately affected traders who experienced significant volatility in their portfolios, leading to tax liability even where the overall trading resulted in losses. Additionally, the rule posed a challenge for brokers operating in Germany, as it dissuaded retail traders from engaging in CFD trading.
Repeal of the rule and current changes
On 22 November 2024, the Bundesrat officially approved the repeal of Germany’s €20,000 cap on loss offsets for forward transactions, including contracts for difference (CFDs). The repeal will be retroactive to January 2021, allowing traders to offset losses incurred since then, potentially resulting in tax refunds.
This move marks a significant shift in Germany’s approach to CFD taxation, and is expected to revitalise the market. Traders will now be able to engage in CFD trading without the burden of potential taxation on their losses.
You can check out this video for more information: https://www.youtube.com/watch?v=yoAVcLDny7o
Future outlook
With the repeal being retroactive, traders who were affected by the 2021 rule will have the opportunity to reclaim taxes or offset their accumulated losses for previous years. This change is expected to attract more German traders back to the CFD market, which has already been one of the largest in Europe. Brokers such as Capital.com are likely to see a positive impact as a result of increased trader participation.
Conclusion
The repeal of Germany’s 2021 CFD tax rule represents a significant win for retail traders and brokers alike. By enabling traders to offset more of their losses, this change is likely to rejuvenate the market and foster greater participation.
At Capital.com, we’re committed to keeping you updated on the latest developments and ensuring you continue to enjoy a competitive and fair trading environment.
Please note, this article is merely for information purposes. If you have any specific questions, we recommend consulting a tax advisor.