Germany is preparing to change how cryptocurrency gains are taxed. A draft bill from the Federal Ministry of Finance would end the country’s one-year tax-free holding rule for crypto bought from 2027 onward and move digital assets into Germany’s flat capital income tax system.
The proposal could increase taxes for long-term Bitcoin holders. However, active crypto traders may benefit because the new flat rate would be lower than the top personal income tax rate currently applied to short-term gains.
Germany’s Crypto Tax Rule Could Change
Germany has traditionally treated cryptocurrency as a private asset rather than a standard capital investment. Under the current approach, investors who hold crypto for more than one year can generally sell it without paying Crypto Tax on the gain.
That rule has made Germany attractive to long-term crypto holders. Unlike many other European countries, Germany does not currently apply a blanket capital gains tax to crypto held beyond the one-year period.
The Finance Ministry circulated a draft bill on September 9 that would change this treatment. The proposal would place cryptocurrency gains under Germany’s Abgeltungsteuer, the country’s flat tax on capital income.
Under the proposed system, crypto gains would be taxed at 25%. After adding the 5.5% solidarity surcharge, the effective rate would reach 26.375%. Church tax could also apply to eligible Crypto Tax payers.
The Proposed Timeline
The draft includes two important dates that investors need to understand.
The new tax treatment would apply to crypto assets acquired on or after January 1, 2027. Assets bought on or before December 31, 2026 would remain covered by the existing rules under the proposed grandfathering provision.
Crypto platforms would then begin withholding the tax automatically from January 1, 2028. This delay would give exchanges and other crypto service providers time to update their systems and collect the required customer information.
The two-stage timeline explains why reports refer to both 2027 and 2028. The tax regime would begin in 2027, while automatic withholding would start one year later.
However, the bill is still in the early coordination stage among federal ministries. Its language could change before it reaches Germany’s parliament, and the grandfathering provisions remain among the details that investors will watch most closely.
Long-Term Holders Face Higher Crypto Taxes
The biggest impact would fall on investors who buy cryptocurrency after the deadline and hold it for more than one year.
Under the existing rules, a German resident who buys Bitcoin and sells it after holding for more than 12 months can generally avoid tax on the gain. Under the draft bill, the same investor would face an effective tax rate of 26.375%, regardless of how long the asset was held.
For example, assume an investor buys Bitcoin for €20,000 and later sells it for €50,000. The €30,000 gain could currently qualify for tax-free treatment if the holding period exceeds one year. Under the proposed rules, the gain could face tax of approximately €7,912.50 before any applicable church tax.
The proposal would therefore remove one of the main reasons German investors have preferred long-term crypto holding.
Active Traders Could Pay Less Crypto Tax
The planned changes would not affect all investors in the same way. Short-term traders could see their tax burden fall.
At present, crypto gains realised within one year are generally treated as income from private sales. The applicable rate depends on the investor’s personal tax bracket and can reach 45% for high earners.
Moving those gains into the flat capital income tax system would reduce the rate for many active traders. A high-income trader could see the tax rate on short-term crypto gains fall from as much as 45% to 26.375%.
That represents a potential reduction of nearly 19 percentage points. As a result, the draft bill would not simply raise taxes across the crypto sector. Instead, it would remove the distinction between short-term and long-term crypto gains.
Long-term investors would lose their main Crypto Tax advantage, while some frequent traders would receive a lower rate.
Loss Offsets Could Improve
The proposal also includes potential benefits for investors with losses.
Under the draft, crypto losses could be offset against gains from securities. This would give investors more flexibility when managing losses across different parts of their portfolios.
For example, a person with a loss from selling Ethereum and a gain from selling shares could potentially use the crypto loss to reduce the taxable securities gain. The current system does not allow this type of offset in the same way.
The proposal would also provide the standard €1,000 savings allowance. Income from crypto lending and staking would be reclassified as capital income and brought under the proposed flat tax framework.
The effect on staking and lending users would depend on how their income is treated under the current rules and which personal tax bracket applies.
Documentation Could Become Critical
One of the most important details concerns cost-basis records.
Crypto platforms may be allowed to rely on purchase prices and acquisition dates supplied by customers when assets are transferred between wallets or service providers. Investors who cannot prove what they paid for an asset could face serious problems.
If a platform does not have reliable cost-basis information, the proposed rules could result in the flat tax being applied to the full sale proceeds rather than only the actual profit. This could create a major Crypto Tax bill for investors who bought assets years ago and no longer have access to exchange records.
Self-custodied crypto could create additional challenges. A holder may have purchased Bitcoin through a platform that later closed, transferred it through several wallets, and eventually moved it to a German exchange. Without records showing the original purchase price and date, calculating the real gain could become difficult.
Investors should therefore treat transaction records, exchange statements, wallet histories, and purchase receipts as important documents.
Fourth Attempt to End the Exemption
The latest proposal is reportedly the fourth attempt in roughly 18 months to remove Germany’s one-year crypto tax exemption.
Earlier efforts came from different political groups and failed for various reasons. A similar proposal was rejected by the Finance Committee in May, with the CDU/CSU, Social Democrats, and AfD opposing it for different reasons, while Die Linke supported it with reservations.
This attempt may have a better chance because it is included in the government’s budget bill rather than presented as a separate motion. Removing a measure from a budget package can be more difficult than rejecting an independent proposal.
Finance Minister Lars Klingbeil had already signalled plans to change crypto taxation during the government’s 2027 budget discussions. He later confirmed that a concrete bill was being prepared.
Still, the proposal is not law. It must pass through the legislative process, and the final version may differ from the current draft.
Limited Revenue, Wider Policy Goal
The government expects the changes to raise about €160 million in additional revenue in 2028. That figure could increase to approximately €350 million per year by 2031.
Compared with Germany’s overall federal budget, the projected revenue is relatively small. This suggests that the government’s main objective may be tax equalisation rather than raising large amounts of money.
Officials appear to view crypto as a form of private capital investment that should be treated more like shares, dividends, and other financial assets. Under that argument, digital assets should not receive a special exemption that is unavailable to comparable investments.
Austria made a similar change in 2022 when it moved cryptocurrency into a flat capital gains Crypto Tax system. However, the country reportedly raised less revenue than expected, partly because investors can delay selling assets when a taxable event is triggered.
Potential Impact on Germany’s Crypto Market
The proposed changes could affect investor behaviour before the new rules begin.
If the grandfathering provision remains in the final law, German residents may have an incentive to buy assets before December 31, 2026. Crypto acquired before the cutoff could retain the existing one-year exemption, while assets bought afterward would face the new Crypto Tax treatment.
The proposal could also encourage some long-term holders to keep their assets rather than sell them. Investors with large unrealised gains may avoid triggering a taxable event, potentially reducing market activity.
At the same time, active traders could find Germany more attractive if short-term gains receive the lower flat rate. The country may lose some appeal for long-term holders while becoming relatively more competitive for frequent traders.
What Investors Should Watch
Several details could still change as the bill moves forward:
- Whether the December 31, 2026 grandfathering date remains in the final text.
- Whether the proposal stays inside the budget bill.
- How exchanges will verify historical purchase prices.
- How staking, lending, liquid staking, and restaking will be treated.
- Whether Germany publishes additional guidance before automatic withholding begins.
- Whether investor activity increases before the proposed cutoff.
For now, Germany’s plan represents a major shift in crypto tax policy. The proposal would end one of Europe’s most favourable long-term crypto holding rules, but it could reduce the Crypto Tax burden for some short-term traders.
The bill remains a draft and is not yet legally binding. German crypto investors should avoid making rushed decisions and consult a qualified tax adviser before changing their investment or reporting strategy.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or investment advice. German Crypto Tax rules may change, and investors should seek guidance from a qualified professional.
