Germany Wants To End Bitcoin’s Tax-Free Perk. Long-Term Holders Could Soon Face A 26% Tax.

Germany is preparing to end a major tax advantage for cryptocurrency investors, with a Finance Ministry proposal that would make gains on newly purchased Bitcoin and other digital assets taxable even when they are held for more than a year.

Under the proposal, crypto acquired after Dec. 31, 2026, would fall under Germany's flat tax on investment income, known as the Abgeltungsteuer. Assets bought before the cutoff would remain under the existing rules, which generally allow private investors to sell cryptocurrency without paying tax once the one-year holding period has passed.

The planned change was first reported by German newspaper Die Welt and based on a draft from the Federal Ministry of Finance. The proposal is still moving through the government process and could be changed before becoming law.

Germany currently treats Bitcoin, Ether and similar privately held crypto assets differently from stocks for income-tax purposes. Finance Ministry guidance classifies a sale within one year of acquisition as a private sale transaction, while a sale after the applicable holding period can be tax-free.

The new system would remove that holding-period exemption for assets purchased after the cutoff and instead treat gains as investment income. Germany's tax rate on most capital income is 25%, with a 5.5% solidarity surcharge imposed on the tax itself, bringing the effective rate to 26.375% before any applicable church tax. The Finance Ministry's tax guidance confirms the 25% rate for capital income.

The change would not apply equally to every type of digital asset. NFTs, some stablecoins, security tokens and certain tokens linked to real-world assets would remain outside the proposed regime, CoinDesk reported. The draft would also classify income generated through crypto lending and staking as capital income.

Both activities are already taxable under Germany's existing rules, although they are treated differently from the capital-income system proposed in the draft. Current Finance Ministry guidance generally classifies income from passive staking and private crypto lending under Section 22 of the Income Tax Act.

The change could reduce the tax burden for some investors who trade frequently. Short-term crypto gains are currently subject to an investor's personal income-tax rate rather than the flat capital-income rate, meaning higher-income investors can face a considerably higher rate. The proposed system would replace that treatment for covered crypto assets with the flat investment-income regime.

The new tax rules are intended to take effect in January 2027, while crypto service providers would have until 2028 before being required to withhold the tax automatically. That would give exchanges and other platforms an additional year to put the necessary systems in place.

Platforms would be able to use acquisition dates and purchase prices supplied by customers when crypto is transferred from another provider. Investors who cannot provide the required records could instead be subject to a 25% flat tax under the proposal.

The Finance Ministry estimates the changes would generate about 160 million euros in additional tax revenue in 2028, rising to roughly 350 million euros annually by 2031. Germany had already signaled that changes were coming: the government's 2027 federal budget plan said it intended to introduce new rules for taxing crypto assets as part of efforts to strengthen government revenue.

The proposal also comes as Germany expands tax reporting for digital assets. Its Crypto-Asset Tax Transparency Act requires covered providers to report information on users and transactions to the Federal Central Tax Office, including the value and volume of crypto acquisitions and disposals. The reporting framework also provides for information to be shared with tax authorities in other participating jurisdictions.

For investors who already own Bitcoin or other covered cryptocurrencies, the Dec. 31 cutoff is the key distinction in the current proposal. Existing holdings would continue under the present rules, while purchases made after that date would no longer become tax-free simply because they were held for more than 12 months.