Key Takeaways
- • Germany's Federal Ministry of Finance has drafted legislation to impose a flat 25% capital gains tax on cryptocurrency holdings, eliminating the current tax-free status for digital assets held longer than one year, effective 2028.
- • The new rules apply only to crypto assets purchased after January 1, 2027, while treatment of previously acquired holdings remains undecided; the €1,000 annual personal allowance for private disposal transactions is expected to remain.
- • The government projects the measure will generate approximately €350 million in additional annual tax revenue by bringing crypto gains under the existing Abgeltungsteuer capital income tax framework.
- • Crypto gains will become offsettable against losses from stocks and other securities once integrated into Germany's capital income tax system, aligning digital assets with traditional securities taxation.
- • The proposal has already circulated among federal ministries for review, positioning 2028 as the effective implementation date for what would represent a fundamental shift in Germany's historically favorable crypto tax treatment.
Summary
Germany is preparing to eliminate one of Europe's most investor-friendly crypto tax regimes by subjecting digital asset gains to a flat 25% capital gains tax starting in 2028. According to a draft prepared by Germany's Federal Ministry of Finance and reported by Der Spiegel, the legislation would end the current exemption that allows investors to avoid taxation on cryptocurrency gains when holding assets for more than one year.
The proposed framework integrates crypto into Germany's existing Abgeltungsteuer (capital income tax) system, which currently applies a uniform 25% rate to gains from stocks and other securities. Under current rules, short-term crypto gains face individual income tax rates as high as 45%, while long-term holdings—those retained beyond 12 months—are entirely tax-exempt. The new regime eliminates this holding-period distinction entirely, subjecting all gains to the flat 25% levy regardless of duration.
The legislation targets crypto assets acquired after January 1, 2027, with the tax taking effect in 2028. The treatment of previously purchased holdings has not yet been determined, creating potential grandfathering provisions for existing portfolios. The Finance Ministry estimates the measure will generate roughly €350 million in incremental tax revenue. A €1,000 annual personal allowance for private disposal transactions is expected to be preserved, similar to existing capital gains thresholds.
A significant advantage under the proposed system is that crypto losses can be offset against gains from stocks and other securities, once digital assets are formally integrated into the capital income tax framework. This treatment aligns cryptocurrency with traditional investment vehicles, potentially limiting the tax exposure for investors managing diversified portfolios. The draft legislation has already been circulated among other federal ministries for interagency review, suggesting the proposal is advancing through Germany's legislative process.
This reform represents a substantial policy reversal that would position Germany's crypto taxation more in line with other developed economies, while potentially redirecting investor capital away from the country's previously advantageous digital asset environment.
The proposed framework integrates crypto into Germany's existing Abgeltungsteuer (capital income tax) system, which currently applies a uniform 25% rate to gains from stocks and other securities. Under current rules, short-term crypto gains face individual income tax rates as high as 45%, while long-term holdings—those retained beyond 12 months—are entirely tax-exempt. The new regime eliminates this holding-period distinction entirely, subjecting all gains to the flat 25% levy regardless of duration.
The legislation targets crypto assets acquired after January 1, 2027, with the tax taking effect in 2028. The treatment of previously purchased holdings has not yet been determined, creating potential grandfathering provisions for existing portfolios. The Finance Ministry estimates the measure will generate roughly €350 million in incremental tax revenue. A €1,000 annual personal allowance for private disposal transactions is expected to be preserved, similar to existing capital gains thresholds.
A significant advantage under the proposed system is that crypto losses can be offset against gains from stocks and other securities, once digital assets are formally integrated into the capital income tax framework. This treatment aligns cryptocurrency with traditional investment vehicles, potentially limiting the tax exposure for investors managing diversified portfolios. The draft legislation has already been circulated among other federal ministries for interagency review, suggesting the proposal is advancing through Germany's legislative process.
This reform represents a substantial policy reversal that would position Germany's crypto taxation more in line with other developed economies, while potentially redirecting investor capital away from the country's previously advantageous digital asset environment.
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