Germany proposes new tax rules for cryptocurrency holdings

The German Federal Ministry of Finance (BMF) has released a 16-page draft law titled ‘Gesetz zur Reform der Besteuerung bestimmter Kryptowerte im Privatvermögen’, proposing a fundamental shift in how digital assets are taxed.

Under the proposal, income from cryptocurrencies would be reclassified from private disposal transactions to capital income under § 20 of the Income Tax Act. This change would eliminate the current tax exemption for assets held for more than one year. Instead, gains from assets like Bitcoin acquired from January 1, 2027, would be subject to a flat-rate withholding tax of 25%, plus the solidarity surcharge, regardless of the holding period.

The reform also aims to standardize the taxation of staking and lending yields as capital income. The draft includes transitional provisions for existing holdings. Industry associations have until October 6, 2026, to submit statements before the plan is presented to the federal cabinet, which is scheduled for October 14, 2026. Additionally, the draft envisions a mechanism for tax deduction through exchanges starting in 2028.