So-called knock-out certificates are a special feature. They offer investors the opportunity to participate disproportionately in the price development of an underlying asset with a small capital investment. In addition, the tax authorities actually wanted to classify them as forward transactions - and thus differently from other certificates.
Since 2021, losses on such forward transactions can only be offset against forward transaction gains up to an amount of 20,000 euros per year.
However, the Federal Fiscal Court did not want to apply this to knock-out certificates and found in a ruling from December 2021 (file number I R 24/19): Knock-out certificates are not forward transactions in the tax sense after all. From this follows: Investors are generally allowed to offset the losses from knock-out certificates without limitation against other income from capital assets.
However, there is one exception: If the securities are already worthless, a loss offset restriction still applies. In this case, the losses can only be offset against other investment income up to an amount of 20,000 euros.
What does this mean for investors?
In the event of a loss, investors should therefore sell knock-out certificates before they are practically worthless. According to the tax authorities, this is already the case when the value falls below the transaction costs.
Partner, Financial Services Tax
KPMG AG Wirtschaftsprüfungsgesellschaft