Germany proposes tax reform for cryptocurrency gains

The German government is considering a fundamental reform to the taxation of cryptocurrencies. According to a draft proposal from the Federal Ministry of Finance, gains from the sale of assets such as Bitcoin and Ether could eventually be subject to withholding tax (Abgeltungsteuer), regardless of how long they are held.

Currently, private profits from cryptocurrency sales are generally tax-free if the assets are held for more than twelve months. The proposed changes would treat disposal gains, as well as income from lending and staking, as capital income. This would remove the special tax status that currently distinguishes cryptocurrencies from stocks and funds.

Key details of the proposal include:

- The reform is intended to apply only to cryptocurrency holdings acquired after December 31, 2026. Existing holdings would remain under the current tax-free holding period rules. - The law is expected to take effect on January 1, 2027, with automatic tax withholding by service providers scheduled to begin on January 1, 2028. - The Ministry of Finance estimates the reform could generate approximately 160 million euros in additional tax revenue annually starting in 2028, rising to 350 million euros by 2031.

While the Federal Cabinet approved an Income Tax Reform Act 2027 on September 2, 2026, that specific draft focused on relief for low-to-middle incomes and families and did not include changes to cryptocurrency taxation. The crypto-specific measures are currently in the early coordination phase within the government.