Germany’s Federal Ministry of Finance has prepared a draft bill that would subject cryptocurrency gains to a flat 25 percent tax, aligning digital assets more closely with stocks and other capital investments. The measure targets assets acquired after December 31, 2026, and is scheduled to take effect in 2028.

Current Rules and Planned Changes

Under existing German law, private investors can sell Bitcoin, Ether and other cryptocurrencies tax-free if they hold them for more than 12 months. Gains realized within one year are taxed at the individual’s personal income tax rate, which can reach 45 percent for high earners.

The draft would bring crypto acquired from 2027 onward under the country’s standard capital income tax regime, known as Abgeltungsteuer. This applies a 25 percent flat rate plus a 5.5 percent solidarity surcharge, producing an effective rate of about 26.375 percent before any applicable church tax. Income from crypto lending and staking would also be classified as capital income.

Assets purchased before the cutoff date would continue under the present framework, preserving the possibility of tax-free disposal after a one-year holding period. Non-fungible tokens, certain stablecoins, security tokens and some real-world asset tokens would remain outside the new rules according to the draft.

Implementation Timeline and Compliance Measures

The law itself is set to apply from January 2027, with crypto service providers required to begin automatic tax withholding in 2028. This one-year buffer is intended to give platforms time to adapt their systems. Providers may rely on purchase prices and acquisition dates supplied by customers when assets move between platforms. Where records cannot be provided, a flat 25 percent tax would apply.

A personal annual exemption of 1,000 euros, equivalent to about 1,170 dollars, is expected to remain in place. Once crypto falls under the capital income system, gains and losses could be offset against those from stocks and other securities. Investors whose personal tax rate is lower than 25 percent could request a more favorable assessment.

Political Background and Next Steps

Finance Minister Lars Klingbeil first signaled plans for a crypto tax overhaul in late April, linking the effort to broader goals of raising additional revenue and strengthening enforcement against tax crime. An earlier parliamentary proposal to remove the one-year exemption was rejected in May, with parties citing the need for a coordinated government approach.

The current draft has been circulated among other federal ministries for review. It still requires cabinet approval and parliamentary passage before becoming law. Final provisions could therefore change during the legislative process.

Germany has simultaneously expanded oversight of digital assets through European Union reporting rules that require service providers to transmit customer transaction data to tax authorities. Regulated crypto services have also grown, with the country leading the European Union in Markets in Crypto-Assets authorizations.

The proposal aims to treat speculative crypto gains more consistently with other forms of investment income while leaving long-standing holdings under the previous, more favorable regime.