Tax tip: Pay attention to higher advance lump sum for investment fund units

In the case of reinvesting investment funds and investment funds with very low distributions, investors are supposed to pay tax on a notional minimum income each year, the so-called advance lump sum. This usually happens on the first working day of the new calendar year - usually 2 January.

The amount of the advance lump sum is essentially based on the base interest rate determined by the Federal Ministry of Finance for the past calendar year. For the years 2021 and 2022, the taxable advance lump sum was zero percent due to the negative base interest rate for the years 2021 and 2022 - now, the Federal Ministry of Finance has determined a base interest rate of 2.55 percent for the year 2023. The advance lump sum to be taxed in principle on 02.01.2024 is thus 1.785 percent.

Investors must note the following: If the investment fund has not made any distributions in the course of 2023 and shows at least an increase in value in this amount, the advance lump sum is deemed to have accrued to the investors in this amount as of 2 January 2024. Taxes are therefore due.

Those who have relied on reinvesting investment funds in recent years because of the very low or effectively suspended advance lump sum could reconsider this decision in future in view of the increased advance lump sums and rely more on distributing investment funds again.

Here is an example: An investor previously held units of an accumulating investment fund worth 100,000 euros. In the years 2022 and 2023, this was advantageous compared to distributing funds, as the advance lump sum and thus the taxation was zero. In 2024, however, he will have to pay tax on an advance lump sum of 1.785 per cent, i.e. 1,785 euros, on 2 January 2024 - provided this is covered by the actual capital gain in 2023. If he had held an investment fund with a distribution in spring 2023 of 1.5 per cent, he would have to pay tax on 1,500 euros in 2023 and only 0.285 per cent, i.e. 285 euros, in 2024 - and thus in total no more, even if the saver's lump sum had already been completely exhausted by other income.