Understanding tax · Jurisdiction DE

Advance lump sum

The advance lump sum is a taxable fund return, even with no payout. The base rate used for it is announced anew each year.

In more detail

Under section 18 of the Investment Tax Act, the advance lump sum is the amount by which a year's distributions fall short of the base return. The base return is the redemption price at the start of the year times 70 percent of the base rate, capped by the actual gain in value including distributions. It cannot be negative. In the year of purchase it is reduced by one twelfth for each full month before the month of purchase. It is treated as received on the first working day of the next year.

Background

For 2026: the finance ministry letter of 13 January 2026 announces the base rate as at 2 January 2026 as 3.20 percent. Under that letter, the advance lump sum for 2026 is treated as received on 4 January 2027. A partial exemption can reduce the taxable part depending on the type of fund. Finmon does not calculate an advance lump sum for a portfolio and names no firm.

An example

A fund pays nothing out in a year, and the value has risen. An advance lump sum can then arise even though no cash arrived in the account. If a distribution already covered the base return, nothing is left for the advance lump sum. Finmon knows neither the redemption price nor the distribution.

A common misconception

If there is no distribution, there is nothing to tax.

The advance lump sum can treat a return as received even though no cash was paid. Whether it arises depends on the base rate, the value and the distributions.

Source: BMF-Schreiben 13. Januar 2026 und InvStG § 18. Last reviewed: 2026-10-29. Editorially reviewed on 2026-10-29. Next review 2027-10-29. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.