A new dawn for CFD trading as Europe’s key economic power adopts a more lenient tax policy, by eliminating the €20,000 loss versus profit offset limit.
A major change is happening in Germany’s CFD trading. Until now, traders could only offset a maximum of €20,000 in losses against their profits each year, which made it harder to manage risk and taxes effectively. However, with the removal of this limit, traders can now offset all their losses against their profits, just like with other financial products. This change, effective retroactively from 2020, is a big win for traders, giving them more flexibility and fairness in taxation. Effective as of 22 November 2024, this bold move of the Bundesrat was hailed by the CFD trading community.
The CFD industry and trading community widely welcome these corrective measures, recognizing them as a significant step toward a fairer and more balanced tax framework. By allowing traders to offset their losses more equitably, Germany sets a positive precedent for other jurisdictions to consider. Industry advocates hope that tax authorities in more countries will take note and implement similar reforms, fostering a more transparent and trader-friendly regulatory environment that supports market participation and financial growth.
How Does it Work?
Stipulated in the Annual Tax Act 2024, it applies retroactively to cases from 2020 onwards. This long overdue legislative tweak is a massive win and a huge nod to the efforts of the German CFD Association that lobbied the Bundesrat for fairer and more transparent CFD profit taxation.
The adjusted levy is applicable to profits generated by CFD trading and other forward transactions, such as options and futures, giving traders more freedom to manage their investments while instilling trust in derivatives trading.
Due to its speculative nature, CFD trading has long been hampered by severe regulatory and taxation restrictions in Germany. The recent tax amendment finally allows traders to enjoy greater capital protection and flexibility in terms of trading choices.
What does the new CFD tax law mean?
Not only is CFD taxation now more accommodating, it is also more equitable in the way tax is withheld. Below is a clear breakdown of how CFD trading profits are taxed in Germany:
- 25% represents capital gains tax
- 5.5% is being retained as “solidarity surcharge”
- Optionally, an 8-9% church tax is also being deducted provided the taxpayer is a member of the church.
Tax allowances and exemptions
In addition, the German tax system provides a certain relief in the form of an annual tax allowance of €1,000 per person per year for capital gains, which counts towards CFD profits. Private investors can claim this allowance to reduce the amount of tax.
There is also a basic allowance on total income, which as of 2025, has been adjusted to €12,096.
When reporting CFD trading profits in Germany, there are at least three aspects to consider:
- If the CFD trading activity has a commercial purpose or is a self-employed undertaking, profits are subject to trade tax. However, business expenses and depreciation can be claimed in this case, to reduce tax.
- Losses from the previous year can be offset against profits from the current year.
- CFD profits generated from currency and cryptocurrency trading may be tax-free, provided that these transactions are carried out peer-to-peer.
Please refer to the following sources for more information:
Risk Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prices can fluctuate rapidly, and past performance is not indicative of future results. Please refer to the full risk disclaimer on our website.
The information provided does not constitute financial advice and should not be relied upon as such. You should seek independent advice before making any investment decision.
