Germany to tax bitcoin gains 25%, ending 12-month tax-free rule

Germany's finance ministry has drafted legislation that would tax gains on bitcoin and other crypto at a flat 25 percent, ending a rule that lets investors sell tax-free after holding for a year.

The draft, reported by Handelsblatt and Die Welt, would apply to crypto acquired after Dec. 31, 2026, while existing holdings keep the current treatment. The ministry framed the change as closing a loophole. "It is unfair that hard-earned income and capital gains are taxed, while profits from speculation with crypto assets remain largely tax-free," the Federal Ministry of Finance said in the bill's explanatory text.

Under the new regime, gains would face Germany's Abgeltungsteuer withholding tax of 25 percent plus a 5.5 percent solidarity surcharge on the tax — an effective 26.375 percent before any church tax. The €1,000 annual savings allowance would remain, and losses could be offset against gains from shares and other securities. Income from crypto lending and staking would be reclassified as capital income. NFTs, some stablecoins, security tokens and certain real-world-asset tokens would stay outside the new regime.

The Finance Ministry expects the measure to raise about €160 million in 2028, rising to roughly €350 million a year by 2031. The law would take effect Jan. 1, 2027, with providers required to withhold taxes automatically from 2028. The draft still must clear cabinet, the Bundestag and the Bundesrat — lawmakers rejected a similar Green Party initiative in May.

The Dec. 31 grandfathering cutoff

The date creates a two-tier system. Investors who bought bitcoin before it keep the ability to sell tax-free after a 12-month holding period, while anyone acquiring after it faces the flat levy regardless of how long they hold. That asymmetry is already reshaping behavior, with some German holders weighing whether to lock in gains on existing positions before the window closes.

The change also inverts the incentive for short-term traders. Today a top-bracket investor selling within a year pays income tax of up to 45 percent; under the draft they would pay roughly 26 percent. The long-term holder who waited out the year moves from zero to roughly 26 percent.

A shift toward the securities regime

Bringing crypto under capital-income taxation aligns Germany with the treatment of stocks and dividends and lets providers withhold at source. Banks and platforms would use purchase prices and acquisition dates supplied by customers when assets move between platforms; investors who cannot provide records would face the 25 percent flat tax.

The proposal lands as Germany implements EU rules requiring crypto service providers to send customer transaction data to tax authorities, part of a broader reporting push tied to the bloc's Markets in Crypto-Assets framework. The revenue is modest next to the federal budget, but the structural change is the point: Germany, long one of Europe's friendlier jurisdictions for long-term crypto holders, would fold digital assets into the same regime as equities.

Until parliament votes, the clock is still running. Investors who buy before the cutoff keep the old rules; those who wait face a tax bill that did not exist a year ago.

This article is for informational purposes only and does not constitute investment advice.