FIFO on ETF Sales: Order of Disposal, Taxes and the Second-Account Trick
When you sell shares or ETF units, you don’t decide which units the tax office considers sold — the FIFO principle (First In, First Out) does. The units bought first count as sold first. In an ETF you’ve been funding for years, those are precisely the lots with the highest unrealised gains — and thus the highest tax bill.
If you know the order, you can legally influence it. The most important tool: a second brokerage account.
How FIFO Drives the Tax on a Sale
A worked example: in 2015 you bought ETF units for €20,000, now worth €50,000 (60% gain share), and in 2024 more units for €30,000, now worth €33,000 (around 9% gain share). If you sell €20,000 worth of units today, FIFO hits the old lot: €12,000 of gain, of which €8,400 is taxable after the 30% partial exemption — roughly €2,215 of German capital gains tax (26.375%).
If you could instead sell from the young lot, the same sale value would carry only about €1,800 of gain — around €330 of tax. Same withdrawal, roughly €1,900 difference. In the withdrawal phase this effect compounds over years; a withdrawal plan calculator makes it visible.
Important: FIFO applies per account and per security (ISIN). Different ETFs are never mixed.
Forecasts and simulations based on your actual portfolio instead of sample values – free with MoneyPeak.
The Second-Account Trick: Legally Working Around FIFO
Since FIFO operates per account, you can steer the order of disposal via a securities transfer:
- Open a second account (same or different broker; a sub-account often suffices).
- Transfer the old lots. A transfer to your own account is not a sale and triggers no tax — the acquisition data moves along. Note: brokers transfer in FIFO order, so the oldest units leave first.
- Sell from the original account: it now holds the young, low-gain lots — the tax per withdrawal drops significantly.
The old high-gain lots stay untouched and keep benefiting from tax deferral. This combines well with loss offsetting: losses realised in the same year reduce the tax on gains that are due anyway. Holdings bought before 2009 enjoy special grandfathering rules — worth a look at the speculation period article.
Frequently asked questions
Can I choose which units are sold?
No — within one account FIFO is mandatory: the oldest units count as sold first. You can only influence the order via separate accounts or sub-accounts.
Does a securities transfer trigger taxes?
A transfer to your own account is not a sale and remains tax-free. Acquisition costs and dates are carried over. Only a transfer with a change of owner (e.g. a gift) is treated differently for tax purposes.
Does FIFO also apply to savings plan units?
Yes. Every savings plan execution creates its own lot with its own purchase date and cost basis. On sale, these lots are settled strictly in purchase order.
Forecasts and simulations based on your actual portfolio instead of sample values – free with MoneyPeak.