Tick that box and IBKR borrows your fully paid shares, lends them on to short sellers, and splits the borrow fee with you 50/50. The part nobody explains: your fee is not calculated on what your shares are worth. It is calculated on the cash collateral IBKR posts back into your account, which is deliberately more than market value.
50 percent to you / 50 percent to IBKRLegs 01 and 02 unwind the moment you sell, or the moment IBKR decides to recall. Nothing here restricts your ability to trade the position.
The dashed line is IBKR's reporting floor. Accruals below 1.00 in the account currency are tracked internally but never printed on the daily statement, which is why small positions look like they earn nothing. The alternating colour marks each 30 day block, at the end of which the accrual is reversed and credited to cash.
This is the three stock example straight off the IBKR pricing page. It is accurate but simplified: it applies the market rate to plain market value and ignores the 102% collateral uplift, so it understates your fee slightly. The last two columns add the correction.
| Stock | Price | Shares | Market value | Rate | Gross fee | Your 50% | Collateral | Corrected |
|---|---|---|---|---|---|---|---|---|
| Stock 1 | 80.00 | 500 | 40,000 | 5.00% | 2,000 | 1,000 | 41,000 | 1,025 |
| Stock 2 | 25.00 | 2,000 | 50,000 | 0.50% | 250 | 125 | 52,000 | 130 |
| Stock 3 | 100.00 | 1,000 | 100,000 | 9.00% | 9,000 | 4,500 | 102,000 | 4,590 |
| Total | 190,000 | 11,250 | 5,625 | 195,000 | 5,745 |
Read the middle column, not the total. Stock 3 alone is 80% of the payout. Stock 2, at half a percent, contributes 130 a year on a 50,000 position, which is 0.26%. That is the shape of almost every real portfolio: one or two hard to borrow names carry everything, and the broad holdings contribute rounding errors.
The rounding also cuts your way on cheap stocks. A share at 1.40 collateralises at 2.00, a 43% uplift on the fee base. A share at 240.00 collateralises at 245.00, an uplift of 2.1%, which is essentially just the 102% margin. Low priced, hard to borrow names are where this program is worth anything at all.
IBKR only borrows what it can place. The market splits roughly into two buckets, and which one your portfolio sits in decides whether this checkbox is worth ticking.
| Bucket | Typical names | Borrow demand | What you should expect |
|---|---|---|---|
| General collateral | Broad index ETFs, mega cap blue chips, most core holdings | Abundant supply, minimal demand | Rarely borrowed at all. When it happens the rate is a fraction of a percent, and your half of that is invisible. |
| Hard to borrow | Heavily shorted small and mid caps, recent IPOs, squeeze candidates, thin single country or thematic ETFs | Scarce supply, real demand | Borrowed often, sometimes at double digit annualised rates. Also the most volatile rates, and the ones IBKR recalls without notice. |
You get no control over selection. There is no per position opt in, no minimum rate you can set, no way to exclude a holding while keeping the rest enrolled. It is one account level switch, and IBKR chooses. If you want per name control you need a broker that offers it, or you keep two accounts and only enrol one.
While on loan the shares are outside the compensation scheme. The cash collateral in your account is the substitute protection, marked daily. Note that scheme caps are low enough to be immaterial on a serious portfolio anyway, so the real protection you rely on is asset segregation, and lending steps outside it.
Voting rights follow the shares to the borrower for the entire loan. If a vote matters to you, the only remedy is to unenrol or sell, and there is no notification when a loan spans a record date.
If a loan is open across a dividend record date, you receive a payment in lieu rather than the dividend itself. IBKR usually recalls before record dates, but usually is not always. A payment in lieu can break withholding tax reclaim and treaty relief, which on a US dividend at 15% withholding can cost more than a year of lending fees on the same position.
Rates reprice constantly and IBKR's own disclosure warns they may move by 50% or more in either direction. Whatever number you see today is not a run rate you can plan against.
Enrolling guarantees nothing. IBKR is not obliged to borrow anything, may borrow a fraction of a position, and may terminate any loan at any time.
Worth stating plainly because it is the one genuine free lunch here: you keep the full economic exposure. Gains, losses, and the right to sell at any moment are untouched. That is why the program is defensible for the right holdings.
The fee is interest, not a dividend. Securities lending income is a fee for granting use of capital, which puts it in the interest-like corner of Einkünfte aus Kapitalvermögen under section 20 EStG rather than the dividend corner. Practical consequences: no Teilfreistellung, no foreign withholding to credit, and it lands in your Verlustverrechnungstopf logic as ordinary Kapitalertrag.
Nobody withholds it for you. Interactive Brokers Ireland is not a German paying agent, so there is no Abgeltungsteuer deducted at source and no Steuerbescheinigung. The income is self declared in Anlage KAP as ausländische Kapitalerträge, and the Sparer-Pauschbetrag does not get applied automatically the way it would at a German broker.
The open question is the payment in lieu. Whether a substitute dividend on a lent share keeps its character for Teilfreistellung on a fund holding, and whether treaty withholding stays creditable, is not something you should settle from a web page. Take one real year of activity statements to a Steuerberater before you enrol a dividend paying position.
Confidence: Low The section 20 classification is well grounded. The payment in lieu treatment for a private German investor at a foreign broker is not clearly settled in published guidance.