Germany is considering a draft law that would eliminate the current one-year tax exemption for cryptocurrency holdings. Under existing regulations, investors who hold digital assets for at least 12 months are exempt from capital gains tax, while shorter-term trades are subject to income tax rates reaching 42%.
The proposed legislation would introduce a flat 25% withholding tax on all crypto gains, plus a solidarity surcharge. This new structure would align crypto taxation with the rules currently applied to shares and dividends. The draft also includes a provision allowing investors to offset losses against gains, with the first €1,000 of annual profit remaining tax-free.
The Ministry of Finance argues that the current exemption unfairly favors speculation over traditional income. If enacted, the change would apply to assets purchased from January 1, 2027. Assets acquired before the end of 2026 would remain under the existing tax rules, preserving the current exemption for long-term holders.
The government projects that these tax changes will generate €160 million in revenue by 2028, with that figure rising to €350 million by 2031. Exchanges are expected to begin automatic tax withholding starting in 2028. The proposal still requires approval from the cabinet and both parliamentary chambers, the Bundestag and the Bundesrat.
