Germany’s Finance Ministry has prepared draft legislation that would impose a flat 25% tax on cryptocurrency gains, ending the long-standing exemption for assets held longer than one year. The change would align crypto with other forms of capital income such as stocks.
The new rules are expected to apply to assets acquired after the start of 2027, with the tax taking effect from 2028.
The Drivers of This Development
Under current German law, private sales of cryptocurrencies held for more than one year are generally tax-free. Gains realized within one year are taxed at the individual’s personal income tax rate. A draft circulating among federal ministries would move crypto into the capital income regime (Abgeltungsteuer). Realized gains would then face a flat 25% rate regardless of holding period, plus the solidarity surcharge (bringing the effective rate to approximately 26.375%) and, where applicable, church tax. The personal allowance is expected to remain, and crypto gains and losses could be offset against those from stocks and other securities. The rules are planned to cover assets bought after January 1, 2027, with automatic withholding mechanisms targeted for 2028. The ministry projects additional revenue of roughly €160 million in 2028, rising toward €350 million by 2031. For perspective, the reform removes one of Europe’s most favorable long-term crypto tax treatments while creating a more uniform capital-gains framework.
It is important to note the fundamental difference between a holding-period exemption that rewards long-term ownership and a flat capital-gains tax applied irrespective of time held: the former creates a strong incentive to delay realization, while the latter treats crypto more like traditional securities and simplifies administration at the cost of the previous tax-free path.
Impact and Broader Context
If enacted, the change would eliminate a key attraction for German long-term crypto investors and could influence holding behavior, realization timing, and possibly capital flows. Short-term traders who previously faced high personal income tax rates may see a lower effective burden under the flat rate. The ability to net crypto losses against other capital gains would improve loss utilization compared with the current narrower rules. Because the proposal remains a draft subject to inter-ministerial consultation and the full legislative process, details—including exact grandfathering for existing holdings—could still shift.
This development sparks important discussions about the balance between revenue raising, tax neutrality across asset classes, and the competitiveness of national crypto regimes. Supporters argue that treating crypto like other capital assets closes an unjustified preferential regime and generates modest additional revenue. Critics contend that ending the one-year exemption reduces Germany’s relative attractiveness for long-term holders and may push some activity elsewhere. Analysts observe that the projected revenue remains small relative to the overall federal budget, suggesting the measure is driven as much by principles of equal treatment as by fiscal need.
Looking ahead, the progress of the draft through further consultations and parliamentary stages will determine the final shape and timing of any reform. This analysis is based on reports of the Finance Ministry draft and related coverage for accuracy and reliability. The legislative outcome and precise application details remain subject to the ongoing political and legal process.