Prop trading and taxes in Germany: what is still open

• Type of income: open. We compare three types of income whose statutory wording could fit: business income (§ 15 EStG), other income from services (§ 22 no. 3 EStG) and investment income (§ 20 EStG). The law decides which applies, not the firm^[1][2][3][4].
• Trade registration: open. Anyone who starts a standing trade has to notify the authority^[7]. Whether trading a firm's simulated account is a trade, the sources do not say^[8].
• FTMO and Topstep leave the tax to you. FTMO says you alone are responsible for all taxes. Topstep sends no tax form to non-US citizens^[26][27].
• The binding answer comes from the tax office. On application it can issue a binding ruling. If the ruling is worth less than EUR 10,000 to you, there is no fee^[22].

According to FTMO, its traders trade with simulated capital only. They are still entitled to a "Reward" paid out as money if they make a profit on the FTMO Account and follow the rules. It is paid once an invoice is approved^[26]. After passing the FTMO Challenge 2-Step the account remains a simulated account^[28] according to the firm profile; by default the Reward is 80%^[29] of the simulated profit.

On tax, FTMO says that you alone are responsible for all taxes, levies and fees that apply to you, and that it is neither able nor authorised to give tax advice^[26]. Topstep's help centre calls all traders "independent contractors" and expressly not employees. Non-US citizens get no tax form from Topstep, and it offers no guidance on tax reporting in other countries^[27].

What a firm calls its payment does not decide the tax. Under § 2(1) EStG, which type of income a payment belongs to in the individual case is determined by §§ 13 to 24 EStG^[1]. Employment income under § 19 EStG covers pay for employment in public or private service^[18]. Topstep's help centre rules out employment^[27]. So this guide compares the three types of income whose statutory wording could fit a payout.

Business income (§ 15 EStG)

Under § 15(2) EStG a business (Gewerbebetrieb) is an independent, sustained activity, carried on with the intention of making a profit, that takes the form of participation in general economic life. Farming and forestry, the liberal professions and other self-employed work are excluded^[2].

How the tax authorities read these features is set out in the notes (Hinweise) of the Official Income Tax Handbook. They rest on rulings of the Federal Fiscal Court (BFH)^[5]:

• Sustained means the activity is meant to be repeated. With several acts of the same kind, the handbook says this is to be affirmed as a rule (H 15.2)^[5].
• A single contract partner does not rule out participation in general economic life, not even if your contract bars you from doing business with others (H 15.4)^[5].
• Buying and selling securities on an ongoing basis is not enough by itself for a business, as long as it happens in the forms usual for private individuals. The handbook applies these principles to currency and precious-metal forwards and to options too (H 15.7 (9))^[5].

Open: the notes on securities trading deal with buying and selling on your own account. At FTMO, according to the firm, you trade simulated capital only^[26]. Whether those principles fit, or whether the payout is rather pay for work done for the firm, the handbook does not say^[5].

Other income from services (§ 22 no. 3 EStG)

§ 22 no. 3 EStG covers income from services (Leistungen), but only where it belongs to no other type of income, such as occasional brokering^[3]. According to the handbook, a service is any act, tolerance or omission that can be the subject of a contract for payment and that triggers a payment in return. What matters is whether the payment is triggered by the taxpayer's conduct (H 22.8)^[6].

Two rules are in the statute itself^[3]:

• Such income is not subject to income tax if it was less than EUR 256 in the calendar year. The handbook calls this limit an exemption limit (Freigrenze). By the wording, from EUR 256 the income is taxable, not just the part above it^[3][6].
• If expenses exceed receipts, the loss may not be set off against other income. It does reduce income from services in the previous year or in later years^[3].

Open: whether your trading is a "service" to the firm and the payout its consideration, neither the statute nor the handbook says^[3][6].

Investment income (§ 20 EStG)

Under § 20(2) EStG, investment income includes, among other things, the gain from forward transactions (Termingeschäfte) through which the taxpayer obtains a cash settlement, or an amount of money or a benefit determined by the value of a variable reference^[4]. Under § 32d(1) EStG, investment income is taxed at a separate rate of 25%^[16]. If such income belongs to a business, it is attributed to the business (§ 20(8) EStG)^[4].

Open: whether a payout whose amount follows the profit on a simulated account is a gain from a forward transaction of your own, no source we read says^[4][26].

Each type of income has its own rules for costs such as challenge fees, for limits and for losses:

Suppose your payouts were other income under § 22 no. 3 EStG and your fees were income-related expenses. You pay EUR 900 in fees in one year and receive EUR 300 in payouts. You then may not set the EUR 600 loss off against your salary. It does reduce income from services in the previous year or later years^[3]. With another type of income, the other rows of the table would apply.

The payout calculator works out what is left of a payout after split, deductions and fees. It does not include tax.

Under § 14(1) of the Trade Regulation Act (GewO), anyone who starts running a standing trade independently has to notify the competent authority at the same time^[7]. For trade law, IHK Hannover, the Hanover chamber of commerce, writes that the terms "Gewerbebetrieb" and "Gewerbe" are not defined by statute. According to case law, a trade is any permitted, profit-oriented and permanent activity carried out independently. Primary production, the liberal professions and managing your own assets are excluded^[8]. IHK Düsseldorf lists the same features and exceptions^[9].

Open: whether trading a firm's simulated account is a trade in this sense, neither the Trade Regulation Act nor the two chamber pages say^[7][8][9]. IHK Düsseldorf says the chamber helps with classification and demarcation^[9]. According to IHK Hannover, registration generally comes before the activity starts, at the public order or trade office of the municipality where the business is based^[8].

What a registration triggers and what skipping it costs:

• According to IHK Hannover, the trade notification also counts as the notification to the tax office under the Fiscal Code^[8].
• Anyone who opens a business must also give the tax office information on the circumstances relevant for taxation, electronically and within one month (§ 138(1b) and (4) AO)^[10].
• Anyone who fails to file a trade notification, or files it wrongly or late, commits an administrative offence, according to IHK Hannover; the fine can be up to EUR 1,000^[8].
• For trade tax, the Income Tax Act's concept counts: a business there is a commercial enterprise within the meaning of the Income Tax Act (§ 2(1) GewStG)^[11]. Trade notification and trade tax sit in different statutes; none of the sources says the two come out the same for prop trading.

We found no BaFin statement on prop firms or challenges on bafin.de (search on 3 November 2026). BaFin says in general that not all companies on the financial market are subject to state supervision and that its warnings can never be complete^[25]. Under § 89 AO, binding rulings on tax come from the tax offices and the Federal Central Tax Office (BZSt)^[22].

• Tax return: If you are employed and wage tax is deducted, you are assessed, among other cases, when your other taxable income adds up to more than EUR 410 (§ 46(2) EStG)^[19]. Investment income on which no capital gains withholding tax was deducted must be declared in the return regardless (§ 32d(3) EStG)^[16]. Which rule applies to your payouts depends on the type of income: open.
• Firm abroad: Anyone with a residence or habitual abode in Germany has unlimited income tax liability (§ 1(1) EStG)^[20]. Whether a double taxation treaty with the firm's home country changes anything, this guide does not examine: open.
• VAT: VAT applies to services that a business (Unternehmer) supplies in Germany for consideration in the course of its business (§ 1(1) UStG)^[21]. Whether you are a business as a trader, whether the payout is consideration and where such a service counts as supplied, none of the sources answers: open.
• Loss bar: Whether the bar on losses from forward transactions in § 15(4) EStG applies to prop trading is open^[2].

1. 1Binding ruling from the tax office. On application the tax office can state bindingly how it will assess a precisely defined set of facts that has not yet happened, if there is a special interest because of significant tax consequences. So it covers plans, not the past. The decision should come within six months. The fee depends on what the ruling is worth to you (Gegenstandswert); below EUR 10,000 there is none (§ 89 AO)^[22].
2. 2Tax advice. Those allowed to examine your case on a business basis include tax advisers, tax agents, lawyers and auditors^[23][24]. Bring the firm's terms, the invoices for your fees and your payout records.

Keep these records outside the firm's dashboard; how is covered in When a prop firm closes. What a simulated account is: "Funded" explained. Payout rules are on each firm's profile, for example FTMO and Topstep.