Germany's Finance Ministry is reportedly preparing a major overhaul of cryptocurrency taxation, with a draft bill proposing a flat 25% tax on crypto gains regardless of how long investors hold their assets.
The proposal, prepared under Vice Chancellor and Finance Minister Lars Klingbeil, was reported by Welt and Handelsblatt. According to the draft, the new system would take effect on January 1, 2027.
Crucially, the changes would apply only to cryptocurrencies purchased from that date. Assets acquired before 2027 would remain under Germany's existing tax rules, protecting current holders from the proposed change.
Germany currently provides one of Europe's most favorable tax arrangements for long-term crypto investors. Crypto gains become tax-free when assets are held for more than 12 months, while profits from assets sold within that period are generally taxed as ordinary income.
For higher earners, that rate can reach 42%.
Crypto Gains Would Face Flat 25% Rate
Under the proposed framework, the holding period would no longer matter for crypto purchased from January 2027 onward.
Instead, gains would be treated similarly to dividends, interest and profits from shares, attracting a flat capital income tax rate of 25%.
Investors would also pay Germany's solidarity surcharge, equal to 5.5% of the tax owed. This would bring the effective rate to approximately 26.375% before any applicable church tax.
The existing €1,000 saver's allowance would apply, while investors could offset crypto losses against eligible capital gains, including profits from shares.
According to reports describing the draft, income generated through crypto lending and staking would also qualify as capital income.
However, not every digital asset would fall under the proposed system. NFTs, security tokens, certain stablecoins and some tokenized real-world assets would reportedly remain outside the new regime.
Existing Crypto Holders Keep Current Rules
The proposed grandfathering provision represents an important distinction for German investors.
Anyone purchasing Bitcoin or other qualifying cryptocurrencies before January 1, 2027 would continue using the existing holding-period rules. That means assets already owned could still potentially be sold tax-free after being held for at least one year.
The Finance Ministry argues that cryptocurrency has increasingly evolved into a conventional form of private capital investment and should therefore no longer receive separate tax treatment comparable to collectibles such as classic cars or artwork.
Critics, however, argue that removing the holding-period exemption could disproportionately affect long-term investors rather than short-term speculators.
Platforms Would Begin Withholding Tax in 2028
The proposal would introduce another significant change for cryptocurrency platforms.
Although the new tax framework would begin in 2027, automatic tax withholding would reportedly start in 2028, giving banks and crypto service providers approximately one year to prepare their infrastructure.
Providers would then remit taxes directly, similar to the system already used for other forms of capital income.
When users transfer assets between platforms, providers could rely on purchase prices and acquisition dates supplied by customers. If investors cannot provide sufficient acquisition information, the flat tax would still apply.
This places additional importance on maintaining accurate transaction and purchase records as Germany moves toward more automated crypto taxation.
Proposal Could Raise €350 Million Annually
Despite representing a significant policy change, the government expects the measure to generate relatively modest additional revenue.
The draft reportedly forecasts approximately €160 million in revenue during 2028, increasing to around €350 million annually by 2031.
The proposal is not yet final. It remains in an early coordination stage within Germany's federal government, meaning details could still change before legislation reaches its final form.
However, the governing Union and SPD reportedly agreed during summer budget negotiations that cryptocurrency taxation should be reformed.
If adopted in its current form, Germany would effectively end one of its most notable crypto tax advantages for future buyers while preserving the existing 12-month exemption for assets acquired before 2027.
