The Abgeltungsteuer (German, from Abgeltung "settlement", "discharge" + Steuer "tax") is a flat tax on private income from capital. It is used in Germany, Austria, and Luxembourg. Germany In Germany, the Abgeltungsteuer was introduced through the that passed the German Parliament on 14 August 2007. The Abgeltungsteuer became effective on 1 January 2009. Earlier tax law In 2009 the Abgeltungsteuer replaced the that had been effective since 2001. The had a procedure whereby taxable income was halved for purposes of dividend taxation. Fifty percent of income, as defined in article 3 number 40 of the Tax Act as amended in 2008, was exempt from income tax. Dividends and taxable capital gains from the sale of investments were taxed (if a certain exemption limit was exceeded) at only half the rate of income tax and . Profits from the sale of equity investments were not taxable if they were held for over a year. The half revenue procedure was moot as of 1 January 2009 with the passage of the new Abgeltungsteuer (Article 32 of the German Income Tax Act). Who is liable The taxation at the level of a shareholder (shareholders or partners) depends on whether the shareholder is an individual or a corporation: If the shareholder is an individual, the distribution as dividend falls under the Abgeltungsteuer with a flat rate of 25 % plus a 5.5 % solidarity surcharge. If the shareholder is a partnership, dividends and taxable capital gains from equity investments are 40 % exempt from taxation. (Art. 3 No. 40 German Income Tax Act as amended of 2009). This is called the and replaced the half revenue procedure for shareholders of partnerships. Accordingly, income from dividends and capital from the sale of company shares that are held as business assets are no longer subject to 50 % taxation (half income method) but now taxed with 60 % of the individual income tax rate. The revenue-related expenses can also be considered tax deductible of 60 %. If the shareholder is a corporation, dividends and taxable capital gains from equity investments are exempt from taxation (Art. 8 b Para. 1 German Corporation Tax Act). In its tax assessment, merely 5 % of the dividends are added to profits as non-deductible operating expenses (Art. 8 b Para. 5 German Corporation Tax Act). Amount of withholding tax The Abgeltungsteuer is levied as a withholding tax. Private investor’s tax liability