Germany proposes tax reform for Bitcoin and Ether

The German Federal Ministry of Finance (BMF) has proposed a draft reform that could fundamentally change the taxation of cryptocurrencies like Bitcoin and Ether for private individuals. Under current regulations, capital gains from cryptocurrencies held for more than one year are generally tax-free. However, the new draft suggests reclassifying these assets as capital assets under Section 20 of the Income Tax Act.

If implemented, this change would eliminate the current one-year holding period advantage for new acquisitions starting January 1, 2027. While existing holdings would likely be protected under grandfather clauses, new purchases would be subject to different tax rules. The reform is currently a draft and must still undergo parliamentary processes to become law.

Additionally, tax implications for cryptocurrency holders moving abroad depend on whether assets are held as private or business property. While the exit tax under Section 6 of the Foreign Tax Act (AStG) applies to shares in corporations, it does not directly apply to directly held cryptocurrencies in private wallets or on exchanges.