Germany is preparing a major overhaul of its cryptocurrency tax framework, with the Federal Ministry of Finance reportedly proposing a 25% tax on crypto gains under the country's capital-income tax system.
According to a draft proposal reported by German media, the new treatment would cover crypto assets acquired after January 1, 2027. The proposal would end the existing advantage under which certain privately held crypto assets can become tax-free after being held for more than 12 months.
Proposed Changes to Germany's Crypto Tax Rules
Under the reported draft, profits from cryptocurrencies such as Bitcoin and Ether would be treated more like gains from traditional financial investments.
The proposed framework would apply a 25% flat tax to qualifying crypto gains, with the wider German capital-income tax system also involving a solidarity surcharge. The reported draft would classify qualifying crypto income under the capital-income regime rather than continuing the existing private-sale treatment.
The reform would represent a significant change for long-term crypto holders because the current rules generally allow private investors to sell qualifying crypto assets tax-free after a holding period of more than one year.
What Happens to Crypto Bought Before 2027?
One of the key features of the reported proposal is a potential grandfathering provision.
Crypto assets acquired before the January 1, 2027 cutoff could remain subject to the existing tax treatment, according to reports on the draft. This would create a distinction between older holdings and assets purchased after the proposed cutoff date.
However, because the proposal has not yet completed Germany's legislative process, taxpayers should not treat the reported provisions as final law.
Automatic Tax Collection Could Begin in 2028
Another important part of the reported reform concerns how the tax would be collected.
Recent reports say the proposed rules could take effect from January 2027, while banks and crypto service providers would receive additional time to develop systems for automatic tax withholding, with such withholding expected to begin in 2028.
The Finance Ministry is reportedly expecting additional revenue from the reform. Recent reporting based on the draft puts the projected additional revenue at around €160 million in 2028, rising to approximately €350 million annually by 2031. Finance Minister Lars Klingbeil had previously discussed a broader expectation of significantly higher additional revenue from a crypto-tax overhaul.
Why Germany Is Revisiting Crypto Taxation
The proposed reform reflects Germany's broader effort to bring digital assets more closely into its established taxation and financial-reporting framework.
The Finance Ministry has argued that crypto gains should be treated more consistently with other forms of investment income. The proposal is also part of wider efforts to strengthen tax compliance and address undeclared economic activity.
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Proposal Still Subject to Legislative Changes
The reported measure remains a draft and must go through Germany's legislative process before becoming binding law. Its provisions, implementation dates and treatment of different digital assets could therefore change.
For now, the proposed 25% rate signals a significant potential shift in Germany's approach to cryptocurrency taxation, particularly for assets acquired from 2027 onward.