Blab Crypto
Germany Drafts 25% Flat Tax on New Crypto Gains, Ending One-Year Tax-Free Rule
Germany’s Finance Ministry has moved to strip a long‑standing tax perk that has protected private crypto traders. The draft proposal, first reported by Die Welt and sourced from the Federal Ministry of Finance, would end the one‑year tax‑free rule for assets purchased after 31 December 2026. Instead, every new gain would be treated as capital income and taxed at the flat 25 % Abgeltungsteuer, plus a 5.5 % solidarity surcharge that brings the effective rate to 26.375 % before any church tax.
Under the current framework, investors who hold Bitcoin, Ether, or other exchangeable crypto assets for more than a year can exit tax‑free. If they sell within 12 months, the gain is considered a private sale transaction and is taxed at the investor’s marginal income‑tax rate, which can climb to 45 %. The draft removes that holding‑period exemption for new purchases, applying the flat capital‑income rate regardless of how long the asset is held.
The proposal is still navigating the legislative process and may be amended before it becomes law. If adopted, the new rules would take effect in January 2027. Crypto service providers would have until 2028 to implement withholding mechanisms, while exchanges could use acquisition dates and purchase prices supplied by customers when a crypto transfer occurs from another provider. Investors who cannot provide the required records would be subject to the flat 25 % tax.
According to the Ministry’s estimates, the change would generate roughly €160 million in additional tax revenue in 2028, rising to about €350 million annually by 2031. The 2027 federal budget already signals a broader effort to strengthen government revenue, including the introduction of new rules for taxing crypto assets.
The draft does not apply uniformly to all digital assets. NFTs, certain stablecoins, security tokens and tokens linked to real‑world assets would remain outside the proposed regime. Income generated through crypto lending and staking would be classified as capital income under the new rules, although such income is already taxable under existing guidance, which treats it as Section 22 income.
The proposal coincides with Germany’s Crypto‑Asset Tax Transparency Act, which requires covered providers to report user and transaction data to the Federal Central Tax Office. The reporting framework also allows information to be shared with tax authorities in other participating jurisdictions.
For investors who already own Bitcoin or other covered cryptocurrencies, the 31 December 2026 cutoff is the key distinction. Existing holdings would continue under the present rules, while purchases made after that date would no longer become tax‑free simply because they were held for more than 12 months.
The change could reduce the tax burden for some frequent traders. Currently, short‑term crypto gains are taxed at the investor’s personal income‑tax rate, which can be higher than the flat capital‑income rate. The proposed system would replace that treatment for covered crypto assets with the flat 26.375 % rate.
In summary, Germany’s draft bill would shift newly acquired crypto gains into the flat capital‑income tax regime, ending the one‑year tax‑free rule for new purchases. The proposal is still subject to legislative review, and its final form may differ from the draft.
The German government’s move reflects a broader trend of tightening crypto tax compliance, with additional reporting requirements and a clearer distinction between private and investment income. Investors and service providers should monitor the legislative process closely, as the final rules will shape the tax landscape for digital assets in Germany for years to come.
Under the current framework, investors who hold Bitcoin, Ether, or other exchangeable crypto assets for more than a year can exit tax‑free. If they sell within 12 months, the gain is considered a private sale transaction and is taxed at the investor’s marginal income‑tax rate, which can climb to 45 %. The draft removes that holding‑period exemption for new purchases, applying the flat capital‑income rate regardless of how long the asset is held.
The proposal is still navigating the legislative process and may be amended before it becomes law. If adopted, the new rules would take effect in January 2027. Crypto service providers would have until 2028 to implement withholding mechanisms, while exchanges could use acquisition dates and purchase prices supplied by customers when a crypto transfer occurs from another provider. Investors who cannot provide the required records would be subject to the flat 25 % tax.
According to the Ministry’s estimates, the change would generate roughly €160 million in additional tax revenue in 2028, rising to about €350 million annually by 2031. The 2027 federal budget already signals a broader effort to strengthen government revenue, including the introduction of new rules for taxing crypto assets.
The draft does not apply uniformly to all digital assets. NFTs, certain stablecoins, security tokens and tokens linked to real‑world assets would remain outside the proposed regime. Income generated through crypto lending and staking would be classified as capital income under the new rules, although such income is already taxable under existing guidance, which treats it as Section 22 income.
The proposal coincides with Germany’s Crypto‑Asset Tax Transparency Act, which requires covered providers to report user and transaction data to the Federal Central Tax Office. The reporting framework also allows information to be shared with tax authorities in other participating jurisdictions.
For investors who already own Bitcoin or other covered cryptocurrencies, the 31 December 2026 cutoff is the key distinction. Existing holdings would continue under the present rules, while purchases made after that date would no longer become tax‑free simply because they were held for more than 12 months.
The change could reduce the tax burden for some frequent traders. Currently, short‑term crypto gains are taxed at the investor’s personal income‑tax rate, which can be higher than the flat capital‑income rate. The proposed system would replace that treatment for covered crypto assets with the flat 26.375 % rate.
In summary, Germany’s draft bill would shift newly acquired crypto gains into the flat capital‑income tax regime, ending the one‑year tax‑free rule for new purchases. The proposal is still subject to legislative review, and its final form may differ from the draft.
The German government’s move reflects a broader trend of tightening crypto tax compliance, with additional reporting requirements and a clearer distinction between private and investment income. Investors and service providers should monitor the legislative process closely, as the final rules will shape the tax landscape for digital assets in Germany for years to come.
