Germany Plans 25% Crypto Gains Tax From 2027 as Holding Exemption Ends

Germany is preparing to tax cryptocurrency gains at a 25% rate, effectively eliminating the one-year exemption period that has allowed investors in Germany to sell their Bitcoin and Ether holdings without incurring any tax obligations for years.

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Germany Targets Crypto Gains With Flat 25% Tax

Germany’s Finance Ministry is preparing a draft that would consider crypto gains as capital gains. The proposal would impose a 25% tax rate on all cryptocurrency sales.

The rate would be applied to all investors, regardless of how long they held the assets prior to selling. Currently, the crypto profits of individuals are not taxed in Germany if they have owned the assets for at least one year.

The current system has different rules for shorter holding periods. Investors can pay personal income tax rates reaching 45% on those gains.

The draft would thus eliminate the advantage enjoyed by long-term crypto investors. However, some short-term traders could pay less than under the current tax structure.

Equal treatment for crypto and other investment income has been argued for by officials. One ministry position characterized it as “unfair” that a lot of speculative crypto profits would still not be taxed.

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New Crypto Tax Could Raise Hundreds of Millions

The government expects the proposed rules will lead to more revenue coming in to the federal government. It is estimated that the Ministry will generate an additional revenue of €160m in 2028.

This figure might rise to approximately €350 million by 2031. The proposed plan includes automatic withholding of exchanges starting in 2028.

German government has already strengthened up the tax reporting of digital asset service providers. The new rules require that companies report data about their customers’ transactions to the tax authorities.

Meanwhile, regulated crypto trading has continued to expanding in the banking sector in Germany. Hundreds of cooperative/savings banks are getting ready for retail crypto services via traditional bank accounts.

The expansion will provide customers with another way to purchase and sell digital assets. Earlier, coingape had reported about the increased involvement of traditional German lenders in retail crypto trading.

Proposal Still Faces Political Review

The Finance Ministry has not completed the planned tax changes. Cabinet approval and parliamentary review remain necessary before the measures can become law.

However, In May, German legislators had previously turned down a proposal to end the one-year exemption. Political parties differed over how the government should change crypto taxation.

Finance Minister Lars Klingbeil later said that he was working on another crypto tax bill. He did not disclose its provisions while talks within the government continued.  

Any final law could therefore differ from the current ministry draft. The proposed amendments will be subject to further negotiations prior to the implementation of a new crypto tax system in Germany.

For more on navigating Germany’s proposed crypto tax changes, see our guide to the best crypto exchanges in Germany.