More and more banks have recently begun charging negative interest rates from savers.

According to a letter from the Federal Ministry of Finance (BMF) dated February 18, 2021, there is also initially bad news from a tax perspective: If a bank retains negative interest rates, these do not constitute negative capital income that can be deducted from a tax point of view - and deposit fees that are not deductible from capital income.

An example: An investor has overnight money of 100,000 euros at a bank and receives 0.1 percent interest for one year. The interest of 100 euros is taxable. At another bank, however, the interest on 100,000 euros overnight money is minus 0.05 percent. The 50 euros to be paid represent non-deductible custody and deposit fees.

In the case of the so-called “graduated interest” that is increasingly encountered, the total interest at the time of the inflow must be considered. Taxable interest arises only if the total return is positive. On the other hand, a negative total return is to be treated as a non-tax deductible deposit or deposit fee. Here, too, is an example. 200,000 euros overnight money is invested for one year at the following interest conditions: Up to a value of 10,000.0 euros, the investor receives positive interest of 0.1 percent per year. From a value of 100,000.01 euros, the negative interest rate is minus 0.05% per year. The first partial amount of 100,000 euros therefore has positive interest of 100 euros (100,000 euros x 0.1 percent). On the second partial amount (100,000 euros to 200.000 euros), there is no negative interest rate of minus 50 euros (100,000 euros x minus 0.05 percent). The positive balance of 100 euros minus 50 euros = 50 euros represents total taxable investment income.

Tip: It is best to divide the total amount between different banks so that you still receive positive interest and use the saver lump sum.

If the 200,000 euros were split between two different banks with 0.1 percent positive interest each, the result would be interest income of 200 euros, which would be tax-free within the framework of the saver lump sum of 801 euros (or 1602 euros for married couples).

The author is a lawyer, tax advisor and partner at KPMG

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