Germany to End One‑Year Tax‑Free Crypto Holding Rule, Introduce Flat 26.375% Capital Tax

Germany’s Federal Ministry of Finance has circulated a draft bill that would abolish the existing one‑year tax‑free holding period for cryptocurrency. The new regime would subject crypto gains to the flat capital income tax (Abgeltungsteuer) at a headline rate of 25% plus a 5.5% solidarity surcharge, resulting in an effective rate of 26.375% before any church tax.

Key Changes

• Assets purchased on or after 1 January 2027 will be taxed under the flat rate.
• Assets bought on or before 31 December 2026 remain under the current rules (grandfathered provision).
• Crypto service providers must withhold the tax automatically starting 1 January 2028.
• Income from crypto lending and staking will be re‑classified as capital income.
• Crypto losses can be offset against gains from securities.

Impact on Different Investor Types

• Long‑term holders lose the tax exemption; gains on positions acquired after the cutoff will be taxed at 26.375%.
• Short‑term traders benefit, as their current marginal income tax can reach 45%; the flat rate reduces their tax burden by up to 19 percentage points.
• Loss‑making investors gain the ability to offset crypto losses against securities gains.

Revenue and Policy Context

The government estimates the change could generate roughly €160 million in additional revenue in 2028, rising to about €350 million annually by 2031 – a modest amount relative to the federal budget. The proposal is framed as an equalisation measure, aiming to treat crypto assets like other private capital investments rather than granting a special holding exemption.

Legislative Outlook

This is the fourth attempt in the past 18 months to end the one‑year rule. Unlike earlier standalone motions, the current draft is embedded in the budget bill, making it harder to remove without a dedicated vote. The Finance Minister has signalled support for the change, while opposition parties such as the AfD continue to back the existing exemption.