Germany's Federal Ministry of Finance has drafted a bill to remove tax-free treatment for bitcoin and other cryptocurrency gains, aligning their taxation with that of traditional securities.
According to CoinDesk, the draft legislation would end a rule that currently allows private investors in Germany to sell bitcoin and other cryptocurrencies free of tax once they have held the assets for more than twelve months. Under the proposal, gains on crypto assets acquired after 31 December 2026 would become taxable regardless of how long they are held. Holdings acquired before that date would continue to be taxed under the existing rules.
New tax framework from 2027
The bill would bring bitcoin, ether, and other cryptocurrencies under Germany's flat withholding tax regime, known as the Abgeltungsteuer. Gains would be taxed at 25%, plus a solidarity surcharge of 5.5% applied to the tax itself, resulting in an effective rate of 26.375% before any church tax. The proposal would also classify income generated through crypto lending and staking as capital income, subject to the same treatment.
Income from crypto lending and staking would be captured for the first time under this classification, extending the scope of the reform beyond straightforward trading gains. Not all crypto-related assets would fall under the new rules: non-fungible tokens, certain stablecoins, security tokens, and some tokens linked to real-world assets would remain outside the regime.
In addition, the legislation is intended to take effect in January 2027, with crypto service providers required to begin withholding taxes automatically from 2028. The one-year gap between the law's entry into force and the withholding obligation is meant to give platforms time to adapt their systems and reporting processes. Providers would be able to rely on purchase prices and acquisition dates supplied by customers when assets are transferred between platforms; where investors cannot produce such records, a flat tax of 25% would apply instead.
Revenue projections and market context
The Finance Ministry estimates the measure would generate approximately EUR 160 million in additional tax revenue in 2028, the first year withholding would apply, rising to around EUR 350 million a year by 2031 as the withholding mechanism becomes fully established.
The reform would also change incentives for different types of investors. Short-term traders, who are currently taxed at their personal income rate, with rates reaching up to 45% for the highest earners, could see their tax burden reduced under a flat rate closer to 26%. Long-term holders of assets acquired from 2027 onward, by contrast, would lose the tax-free exit currently available after a one-year holding period.
The proposal reflects a broader move by European tax authorities to bring crypto assets within standard capital income frameworks rather than treating them as a distinct asset class. For crypto exchanges and custodians operating in Germany, the shift would introduce new compliance obligations around transaction record-keeping and automated withholding, comparable to those already applied to conventional brokerage accounts.
