Internal Market Compatibility of the Proposed Measure Remains Unclear
In Germany, about 25 listed companies are slated to dish out dividends this year, some of them tax-free. One such bigwig is Deutsche Telekom, post their Annual General Meeting on April 9, 2025. Shareholders are in for a 90 cents per share payout, sans any tax deductions, according to a announcement from the Investor Relations department. The ex-date is April 10, and the payment date is set for April 14. Holding onto shares until the AGM nets you the dividend, with a current dividend yield of 2.6 percent.
You're probably wondering about the tax-free bit, right? The legislative backing for this deal stems from past balance sheet restructuring. In essence, a tax-function in the shareholder account separates the cash injected by investors from the profits gained by the company itself, resulting in shareholders receiving their payouts "gross for net," without the saver's allowance (€1,000 for singles, €2,000 for married couples) being affected.
This tax-free deal carries over for long-term investors. Those who snapped up dividend papers before the 2009 introduction of the withholding tax can enjoy tax-free capital gains upon selling. Bonus points: Deutsche Telekom's IPO took place on November 18, 1996 (issue price: €14.57 per share), the second on June 28, 1999 (issue price: €39.50 per share), and the third on June 19, 2000 (issue price: €66.50 per share).
Now, for shareholders who jumped on board post 2009, things are a bit different. You'll at least experience a "tax deferral" effect with dividend payments from the shareholder account—the tax-free payouts will be deducted from the purchase price for subsequent sales, with the capital gains resulting from the difference subject to tax.
For stock market whizzes with a family focus, there's a trick up the sleeve to preserve the tax advantage: transfer Telekom shares purchased after 2008 to the accounts of your kids and grandkids, then let the little ones sell the securities just as their acquisition costs plummet due to the continuous reduction of the purchase price. Since your offspring has their own tax-free allowances (€13,132 for the tax year 2025), any realized capital gains up to this limit remain tax-exempt. Be careful though—transferring shares back into your own account would raise red flags with the tax office.
Now, if you're curious about tax-free employee shares and the expanded eligible circle for the same, take a gander: Tax-free employee shares: Circle of eligible persons now expanded. And if you're interested in knowing about the stock market's tumult and the dividend stocks Thomas Schuessler is betting on, check it out: Turning point in the stock market: A threat looming and Schuessler's pick of dividend stocks
In the realm of investing, especially in German real-estate and businesses such as telecommunications, long-term investors might benefit from tax-free dividends, a phenomenon linked to past balance sheet restructuring. For instance, Deutsche Telekom, a notable company within this sphere, offers tax-free dividends to shareholders who purchased their stocks post-2009, albeit with a tax deferral effect.
Moreover, savvy investors with a family focus might find a way to preserve the tax advantage by transferring Telekom shares purchased after 2008 to the accounts of their children and grandchildren, allowing them to sell the securities at a lower cost due to the continuous reduction of the purchase price, potentially taking advantage of their own tax-free allowances.
