Germany is preparing a draft to tax cryptocurrency gains at a flat 25% rate, which would eliminate the one-year exemption period that has allowed investors to sell digital assets such as Bitcoin and Ether without tax obligations. Under current rules, individual crypto profits are not taxed if the assets are owned for at least one year, while shorter holding periods face personal income tax rates of up to 45%.
The proposed changes would classify crypto gains as capital gains and apply the 25% rate to all investors regardless of holding duration. While this removes the advantage for long-term investors, some short-term traders could potentially pay lower rates than under the existing structure. Officials have argued that the current system is unfair because many speculative crypto profits go untaxed, and the government seeks to align crypto taxation with other investment income.
Revenue Projections and Reporting Rules
The German government anticipates increased federal revenue from the proposed measures. The Ministry estimates generating an additional €160 million in revenue in 2028, with that figure potentially rising to approximately €350 million by 2031. The plan also incorporates automatic withholding by exchanges beginning in 2028.
Germany has previously moved to strengthen tax reporting requirements for digital asset service providers, mandating that companies report customer transaction data to tax authorities. Concurrently, regulated crypto trading continues to expand in the banking sector, with numerous cooperative and savings banks preparing to offer retail crypto services through traditional bank accounts.
Political Review and Next Steps
The Finance Ministry has not yet finalized the tax changes, and the proposal still requires cabinet approval and parliamentary review before becoming law. In May, German legislators turned down a previous proposal to end the one-year exemption amid differing views among political parties on crypto taxation.
Finance Minister Lars Klingbeil subsequently indicated he was working on another crypto tax bill without disclosing its provisions during ongoing government discussions. As a result, any final legislation may differ from the current ministry draft as negotiations continue prior to implementation.
