Germany’s Federal Ministry of Finance has drafted a bill that would end the country’s tax exemption for cryptocurrency held longer than a year and replace it with a flat 25% capital gains tax. The rules would apply only to assets acquired on or after January 1, 2027, with the tax itself taking effect in 2028, according to a departmental document reported by Welt and confirmed by Handelsblatt. Finance Minister Lars Klingbeil authored the draft, which has been circulated among other federal ministries for review. It has not yet reached parliament.
Under current German law, privately held crypto is treated as a private asset rather than a security. Sell within twelve months of buying and the profit is taxed at the investor’s personal income rate, which reaches 42% for higher earners and 45% at the top. Hold for more than a year and the gain is entirely tax-free. The ministry set that position in 2022 and later extended it to coins used for staking and lending. The result is one of the most generous crypto tax regimes in Europe, and Germany became a favored jurisdiction for long-term retail holders as a consequence.
What the draft changes
The proposal moves crypto gains into the Abgeltungsteuer, the flat capital income tax that already covers dividends, share profits and interest. The 25% rate carries the 5.5% solidarity surcharge, bringing the effective burden to about 26.375% before any church tax. A personal allowance is expected to survive. Germany currently exempts private disposal transactions up to 1,000 euros, and the draft reportedly keeps some form of threshold in place.
A grandfathering clause protects everything bought before the 2027 cutoff. Coins purchased this year or next would keep the twelve-month exemption indefinitely. The change lands entirely on future acquisitions, which is why analysts describe the immediate effect as a sentiment shift rather than a market event. Bitcoin traded near $77,700 on Friday, little moved by the report, and German-language crypto forums spent more time debating the politics than the price.
| Current rules | Draft proposal | |
|---|---|---|
| Rate on gains | 0% after 12 months, up to 45% before | Flat 25% plus surcharge |
| Applies to | All private crypto holdings | Assets bought from Jan 1, 2027 |
| Effective from | 2022 guidance | 2028, pending legislation |
| Platform withholding | None | Automatic, from 2028 |
Politics of the exemption
The ministry has been working on the change for months. In May, Germany’s Finance Committee rejected a Green Party proposal that would have removed the long-term exemption immediately. The CDU/CSU and the Social Democrats opposed it, though for different reasons. The SPD argued at the time that the government was already drafting its own bill, and Klingbeil’s ministry continued that work. Die Linke supported the Green motion with reservations.
The draft stops short of the Green proposal in one respect: it lowers the rate for short-term traders even as it ends the exemption for patient holders. Someone who currently sells within a year at a 42% personal rate would pay 25% under the new system. Someone who holds for two years would pay 25% instead of nothing. The distributional trade-off is deliberate, and it mirrors how Germany already taxes securities. It also gives the finance ministry a predictable revenue line it currently lacks, since crypto disposals under the old rules mostly escape the tax net entirely.
What it means for holders
The practical question for German investors is timing. Anyone weighing a disposal of pre-2027 acquisitions faces no urgency, since those assets keep the exemption regardless of when they are sold. Future purchases are different. If the bill passes as drafted, gains on coins bought from January 2027 onward will be taxed at 25% no matter how long the holding period lasts, removing the incentive to sit on positions for a year.
Traders may also front-run the cutoff. Buying before January 1, 2027 locks in grandfathered treatment, which could pull demand forward into late 2026 if the draft advances on schedule. That is speculative until the bill reaches parliament, and coalition politics could still alter the rate, the cutoff date or the withholding mechanism. The ministry has not published a legislative timetable.
Automatic platform withholding starting in 2028 is the quieter but heavier part of the proposal. It would move tax collection from voluntary self-reporting to deduction at the source, closer to how brokers handle stock gains. Exchanges serving German customers would calculate and remit the tax on disposals, which reduces evasion but also requires reporting infrastructure most platforms do not yet run. Industry groups in Brussels have lobbied against fragmented national withholding regimes, arguing they conflict with the EU’s own MiCA framework, though Berlin appears unbothered so far.
Compliance costs matter for smaller exchanges. German platforms already collect identity data under anti-money-laundering rules, but calculating per-user cost basis across wallets, staking rewards and airdrops is a different problem. The draft reportedly gives platforms a grace period after the 2028 start, though details remain thin in the leaked document.
Germany is not alone in rethinking crypto taxation, but it is moving against the direction of travel in the United States, where companies including Block have sought banking charters to custody bitcoin and stablecoins inside the regulated system. Europe’s largest economy is instead folding crypto into its existing capital income framework, on standard terms, with no special carve-out for holding. Whether that normalizes the asset class or simply pushes German traders toward longer off-ramps is the question the Bundestag will get to answer when the bill arrives.