Germany is preparing a significant change to the taxation of cryptocurrencies. A draft from the finance ministry, led by Lars Klingbeil, would end the rule that currently allows individual investors to sell Bitcoin, Ethereum and other crypto assets tax-free after holding them for more than a year.
Under the proposal, gains on crypto assets bought after 31 December 2026 would be taxed regardless of how long they were held. In practice, the country would bring the treatment of Bitcoin and Ethereum closer to that of traditional investments such as shares and funds. Cryptocurrencies acquired before that date would remain under the current rules, with no retroactive charge.
Today, German investors can sell cryptocurrencies tax-free if they hold the assets for more than 12 months. That benefit has made Germany one of the most favourable European countries for long-term crypto investors. With the change, that advantage would disappear for new purchases made from 2027 onward.
The new model would apply the Abgeltungsteuer, the withholding tax used for capital gains in the country. The rate would be 25%, plus a 5.5% solidarity surcharge on the tax, bringing the effective burden to 26.375%, before any church tax.
Staking and lending also in scope
The draft would also classify income from staking and lending crypto assets as capital income. This means returns earned by investors who lock tokens on proof-of-stake networks or lend crypto assets would also fall under the tax regime for financial investments.
The proposal, however, is not expected to affect all types of digital assets in the same way. According to the report cited by the German press, NFTs, some stablecoins, security tokens and certain tokens linked to real-world assets would remain outside the new regime.
The change could have different effects depending on the investor's profile. For those who buy and hold crypto for more than a year, the impact would be negative, since the exemption would no longer apply to new acquisitions. For short-term traders, however, the flat rate could be more favourable, since gains on shorter-term operations can currently be taxed at the personal income rate, which reaches 45% for higher earners.
Platforms will have to withhold tax automatically
The law is expected to take effect in January 2027, but automatic tax withholding by crypto service providers would only begin in 2028. The idea is to give exchanges and platforms an extra year to adapt their systems.
Companies will be able to use price and acquisition date data provided by clients themselves when assets are transferred from one platform to another. If an investor cannot prove this information, taxation would apply at the flat rate of 25%.
The finance ministry estimates the measure will generate 160 million euros in additional revenue in 2028. By 2031, annual revenue could reach around 350 million euros, according to information published by the German press.
The text is still under discussion within the government, and changes may occur during its passage. Even so, the proposal already signals an important shift in Germany's stance: the country, which until now offered one of Europe's most favourable rules for crypto holders, is moving toward treating Bitcoin and Ethereum increasingly like traditional financial investments.
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