Germany Proposes Ending Tax-Free Crypto Gains in Shift Toward Stock-Like Taxation
A draft proposal from the Federal Ministry of Finance would replace the current one-year holding exemption with a 25% flat-rate tax starting in 2028.
Germany is moving to dismantle one of Europe's most favorable tax regimes for digital assets. The German Federal Ministry of Finance has issued a draft proposal that would eliminate the long-standing tax exemption for cryptocurrency gains, signaling a fundamental shift in how the state views digital currencies.
Under the new proposal, profits from cryptocurrency transactions would be subject to a standard 25% flat-rate tax, known as Abgeltungssteuer. This would align the taxation of digital assets with that of traditional stocks. According to the draft, these changes are slated to take effect in 2028, and the new tax rules would specifically apply to crypto assets acquired after December 31, 2026.
The End of the One-Year Rule
For years, Germany has treated cryptocurrencies as private assets, similar to collectibles, under §23 EStG of the Income Tax Act. This classification created a significant incentive for long-term investors: the "1-year rule." Under current law, private investors can sell Bitcoin and other digital assets entirely tax-free provided they have held the assets for more than 12 months. For assets sold within a year, a small short-term allowance—typically €1,000—is applied before taxes kick in.
Market Implications
This policy pivot is significant because Germany has long been regarded as a crypto-friendly jurisdiction due to this holding exemption. By transitioning to a flat-rate tax, the government is effectively removing the primary fiscal incentive for "HODLing," or holding assets long-term. The move is expected to increase government tax revenue from the digital asset sector while treating crypto as a standard financial instrument rather than a private collectible.
What to Watch
While the draft proposal outlines a clear path toward 2028, the transition remains subject to legislative approval. Investors will be watching closely to see if the December 31, 2026, acquisition cutoff remains firm, as this date determines which assets will remain protected under the old regime and which will fall under the new 25% levy. The proposal marks a broader trend of European nations seeking to standardize the taxation of volatile digital assets to match traditional capital markets.