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FollowingGermany plans to end the tax exemption policy for long-term holding of cryptocurrencies and impose taxes at a flat rate of 25% starting from 2027.
The German Federal Ministry of Finance has drafted a draft legislation aimed at ending the country's current policy of exempting income tax on cryptocurrency gains held for at least one year. Under the proposal, profits generated from the sale of cryptocurrencies would instead be taxed at a fixed tax rate of 25%. The new rules only apply to assets acquired on or after January 1, 2027.
According to a report by the German news media Welt on September 9, the draft was based on a departmental document from mid-August 2026, and the German financial media Handelsblatt also separately confirmed the proposal. The bill was drafted by Lars Klingbeil, German Deputy Chancellor and Finance Minister.
New operating mechanism
According to current German law, once the holding period of cryptocurrency assets exceeds 12 months, profits generated from their sale will be completely tax-exempt. The Ministry of Finance established this position in 2022 and subsequently expanded its scope to include tokens used for pledge and borrowing. Currently, if these assets are sold within a 12-month window, they are subject to general income tax, with a tax rate of up to 42% for high-income earners.
The draft will eliminate tax exemption for assets purchased after January 1, 2027. Earnings on such assets will be classified as "capital income" and will fall into the same category as dividends, stock profits and interest. The 25% fixed tax rate also includes a 5.5% solidarity surcharge on the tax payable, so the effective tax rate is approximately 26.375%, after deducting church taxes.
Under the proposed rules, Germany's existing 1,000 euros (approximately US$1,164) saver tax exemption will still apply. Losses can be used to offset gains, including stock gains. Income from loans and pledges will also be classified as capital income. However, non-homogeneous tokens (NFTs), security-based tokens, certain stablecoins, and some real-world asset tokens (RWAs) will be excluded from the proposed regime.
The Ministry of Finance pointed out in the draft that cryptocurrency assets have now become the mainstream form of personal capital investment. The government said the current system is unfair because income from hard work and capital gains are subject to tax, while profits from cryptocurrency speculation are largely tax-exempt. Critics point out that removing the hold period exemption clause would have a greater impact on long-term holders rather than mainly targeting short-term traders, as the argument suggests.
Automated tax withholding mechanism and fiscal impact
Automated tax withholding mechanism for banks and platforms will not be implemented immediately, but will be postponed until 2028. This would give service providers a year to build the needed systems after the rules take effect. When assets are transferred between different platforms, service providers can rely on purchase price and acquisition date data provided by customers. If such data is not available, a fixed tax rate will apply by default regardless of the actual holding period.
The Ministry of Finance expects this change to bring in 160 million euros (approximately US$176 million) in revenue in 2028. Annual revenue is expected to increase to 350 million euros (approximately US$385 million) by 2031. Klimber had said in April 2026 that Germany expected to generate up to 2 billion euros (approximately US$2.3 billion) in additional total revenue through cryptocurrency taxes, although the figure did not appear in the August draft text.
Currently, the bill is still in the early stages of coordination within the federal government and may be revised before it is finalized. During budget negotiations in the summer of 2026, the ruling coalition (CDU/CSU and Social Democratic Party) agreed to advance the cryptocurrency tax plan, providing coalition level political support for the proposal.
