Germany proposes 25% flat crypto tax, ending one-year holding exemption

This draft targets a tax system that has been among Europe's most favourable to cryptocurrencies, but for now its impact is felt more in sentiment than in market prices, because it applies only to future purchases and has not become law. If a timeline is confirmed, longer-term German holders might reconsider when to sell, especially those deciding whether to take profits under the current exemption before the new rules take effect. The measure's expected revenue is modest, beginning at about €160 million and climbing to roughly €350 million a year, suggesting it is designed more as an alignment with existing capital income rules than as a major revenue raiser. An earlier push by the Greens to alter crypto tax law was voted down in a committee in May, indicating that the legislative outcome remains uncertain.

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Germany proposes 25% flat tax on crypto, ending the one-year holding exemption.

The German Finance Ministry has produced a draft law that eliminates the nation's longstanding tax-free status for cryptocurrencies held longer than one year, substituting a uniform 25% capital gains levy. The new rules would cover only assets bought from January 1, 2027 onwards, based on a ministry draft reported by Welt and Handelsblatt this week. Coins obtained earlier would remain under the current regime.

The significance

At present, German law makes crypto gains completely tax-exempt after a holding period of twelve months. A sale within that term is taxed at the investor's personal income rate, which can reach the mid-40s percent. This exemption has positioned Germany as one of Europe's more favorable places for long-term crypto investors.

The draft legislation would place cryptocurrencies in the same capital income category as dividends and stock profits—called the Abgeltungsteuer in Germany—and tax gains at a uniform 25% irrespective of the holding period. Adding the standard solidarity surcharge brings the effective rate to about 26.4%, not including church tax. The current €1,000 saver's allowance would remain, and losses from crypto could be offset against gains from other assets, including shares.

Changes and their timing

It is important to distinguish the two dates in this report, as some media have mixed them up. The new tax rules would apply to crypto acquired on or after January 1, 2027. Automatic withholding by exchanges and platforms, where tax is collected at source, would not begin until 2028, giving providers about a year to set up reporting systems. Tokens purchased before the 2027 cutoff would retain the current tax-free-after-one-year treatment, a type of grandfather clause.

Finance Minister Lars Klingbeil initially signaled a crypto tax revamp in late April. The ministry expects the proposal to generate around €160 million in 2028, climbing to roughly €350 million annually by 2031, a fairly small amount compared with the political significance of ending a decade-old exemption.

Factors that could alter the outcome

This remains a draft that is circulating inside the government, not yet passed into law. It has not been submitted to the Bundestag or Bundesrat, and a comparable Green Party proposal was turned down by the Bundestag's Finance Committee in May. The ministry has reportedly not answered detailed queries about the text, and it is unclear how the new framework would align with the EU's DAC8 crypto reporting rules that are already being implemented.

Next steps to watch

The true test ahead is whether this draft makes it through coalition negotiations and is formally introduced as a bill. If it stalls like the Greens' version did, the one-year exemption stays in place for now. If it progresses, German holders are likely to rush to record clear acquisition dates well before the 2027 cut-off, because platforms may default to the flat rate when purchase history cannot be proven.