Investing in Germany as an expat: ETF Sparplan, brokers, and pension basics

Last updated: May 2026

If you live in Germany and earn here, your money sits in the same investment system any local uses. The barriers are administrative, not legal. You need an Anmeldung at your address, a tax ID (Steueridentifikationsnummer), a German bank account or broker that accepts your residence permit, and one piece of paper called a Freistellungsauftrag. Once those are in place, an ETF savings plan (Sparplan) runs on autopilot for €25 to €500 a month and does most of the work for the next 20 years. See tips to manage finances in Germany for the broader money setup, and the /live/finances pillar for everything from Schufa to taxes.

Can expats invest in Germany?

Yes. If you are a German tax resident (you have a permanent home here, or you stay more than 183 days in a year), you can open accounts with any German or EU broker, and you owe German tax on worldwide investment income. There is no nationality gate. The friction sits in three places: brokers ask for proof of residence and a tax ID before opening an account, some brokers refuse non-EU passport holders even when you live in Germany, and any account you opened back home now has to be declared on your German tax return.

US citizens have one extra wrinkle. Under FATCA, most German brokers will not open a depot for an American passport holder regardless of residence. The workarounds are narrow: a few US-friendly EU platforms, your existing US brokerage held while abroad with German tax filings layered on top, or a specialist tax adviser. If you are not American, ignore this paragraph.

How investment income is taxed in Germany

Germany taxes capital gains, dividends, and interest at a flat Abgeltungssteuer of 25 percent, plus 5.5 percent Solidaritätszuschlag on the tax (so 26.375 percent effective), plus 8 to 9 percent church tax on the tax if you are registered with a church. Your broker withholds and remits this for you.

Three reliefs and one quirk:

Sparer-Pauschbetrag. Each adult gets €1,000 of investment income per year tax-free, €2,000 for jointly assessed couples. To use it, file a Freistellungsauftrag with your broker (a one-page online form). With several brokers, split the €1,000 between them. Without the form, the broker withholds tax from the first euro.

Teilfreistellung. Equity ETFs (more than 50 percent stocks) get a 30 percent partial exemption on both gains and the Vorabpauschale, dropping the effective tax on equity ETF gains to roughly 18.5 percent before Soli.

Vorabpauschale. An annual advance tax on accumulating funds (ETFs that reinvest dividends rather than paying them out). Calculation: start-of-year value times the Bundesbank base rate (Basiszins) times 0.7, minus any actual distributions. The base rate for 2026 is 3.20 percent, so the basis-yield is 2.24 percent of your January 2026 portfolio value. On a €10,000 equity ETF, you would owe roughly €224 of notional income, then the 30 percent Teilfreistellung knocks that to €157, then 26.375 percent tax on €157 is about €41. Your broker pulls this in January 2027 from the cash balance in your depot. Keep enough cash there in early January or your broker will sell shares to cover it. When you eventually sell, the Vorabpauschale already paid is credited against the final capital gains tax. It is a timing tax, not an extra tax.

ETF Sparplan basics

A Sparplan is a standing order from your bank account into one or more ETFs, monthly, typically €25 to €500 per slot. You pick the ETF, the amount, the day of the month, and the broker handles the buy at one of two execution windows that month.

Accumulating versus distributing. Accumulating funds reinvest dividends inside the fund, distributing funds pay you cash quarterly. Accumulating is operationally simpler but you owe Vorabpauschale every January. Distributing avoids Vorabpauschale (the distribution is the year's income) but you have to redeploy the cash. Tax over a 20-year hold roughly evens out. Pick by behaviour, not by tax theory.

Costs that matter. A Sparplan execution fee can be €0 (most neobrokers, on a curated list of ETFs), or 0.2 to 1.5 percent of the order at traditional banks. Spread and the ETF's TER (total expense ratio, 0.05 to 0.40 percent for broad index trackers) matter more over the long run than the per-buy fee.

Choosing a broker without picking a brand

Brokers come and go, get acquired, change pricing, or quietly stop serving non-EU residents. Rather than name a current winner, here is the checklist that survives a broker change.

Two broad categories. Neobrokers (app-first, low or zero commissions, smaller ETF universe) are cheapest for a pure ETF Sparplan and beginner-friendly. Direktbanken and traditional brokers (web-first, hundreds of ETFs, higher fees but more breadth) suit anyone who wants individual stocks, bonds, or specialty funds alongside ETFs.

Pension layer:

Riester is being phased out

Germany's pension sits on three pillars. The first is the statutory Rente (gesetzliche Rentenversicherung), paid through payroll if you are an employee. The second is the workplace pension (betriebliche Altersvorsorge or bAV), often matched by your employer. The third is private pension products: Riester (state-subsidised), Rürup (for the self-employed), and standalone insurance contracts.

The government has agreed to replace Riester with a new private pension framework that holds more equities, has lighter guarantees, and is meant to roll out from 2027. Existing Riester contracts keep running, but for an expat starting fresh in 2026, opening a new Riester contract is no longer the obvious move.

For most working expats: statutory Rente (automatic) + bAV if your employer offers one with a meaningful match (free money, take it) + a broad ETF Sparplan in a regular depot for the third layer. Wait for the new private pension product to land before locking new money into Riester.

Common mistakes

• Forgetting the Freistellungsauftrag and watching Abgeltungssteuer come out of your first €1,000 of gains for years before noticing.
• Holding investment accounts back home without declaring them. Robinhood, Zerodha, HDFC mutual funds, all of it gets declared on Anlage KAP-INV.
• Topping up a Riester contract opened the day you got your Anmeldung, before checking whether the 2027 reform makes the contract a bad fit for the next 30 years of contributions.
• Letting the depot run dry of cash in late December. The January Vorabpauschale charge then forces an automatic share sale at whatever price.
• Picking a broker on rebate offers and discovering six months later they do not issue a Steuerbescheinigung in the format your Steuerberater needs.

FAQ

Do I need to be a German citizen or permanent resident to open a German broker account?

No. You need an Anmeldung at a German address, a German tax ID, and a residence permit (or EU passport). Most brokers also ask for a SCHUFA check and a video-ident or PostIdent verification. Some neobrokers refuse non-EU passport holders for compliance reasons even when you are a German tax resident, so you may need to try two or three.

Will my broker handle taxes automatically?

Broadly yes if the broker is BaFin-licensed or EU-passported with a German tax certificate. They withhold Abgeltungssteuer, Soli, and church tax (if applicable), apply your Freistellungsauftrag, and bill the Vorabpauschale every January. You only need to file a tax return for capital gains if you are over the Sparer-Pauschbetrag and want to use deductions, or if you have foreign-broker income.

How much do I need to start a Sparplan?

Most brokers accept Sparplan slots from €1 or €25 per month. The right amount is whatever you can sustain through a downturn without stopping. €100 to €500 per month is a common starting band. Increase the amount per ETF before you increase the number of ETFs.

Is a Riester contract still worth opening in 2026?

Probably not for a new contract. The government has agreed to replace Riester with a new private pension framework, with rollout planned for 2027. Existing contracts continue. For a fresh start, take any employer-matched bAV first, then build a broad ETF Sparplan, then revisit private pension once the new framework is live.

What happens if I leave Germany?

You stop being a German tax resident on the day you deregister your address (Abmeldung) and no longer have a permanent home or 183 days here. Your German broker account can usually stay open, but Abgeltungssteuer treatment changes, and exit-tax rules may apply on certain holdings. Talk to a Steuerberater before you move.

Where to next

• Tips to manage finances in Germany, the broader money checklist for new arrivals.
• Paying taxes in Germany as an international student, useful primer if you are still in study mode.
• How to open a German bank account, the prerequisite step before any broker.
• The /live/finances pillar for taxes, Schufa, insurance, and the rest.