Bitcoin ETF Tax in Germany: Why the One-Year Rule Fails

In most countries the choice between holding bitcoin and holding a fund that holds bitcoin is a convenience question. In Germany it is a tax question, and the gap between the two answers is larger here than almost anywhere else.

What makes German direct holding unusual

The BMF classifies cryptocurrencies as private assets. Gains on disposal are a private disposal transaction under section 23 of the Income Tax Act, taxed at your personal income tax rate of 0 to 45%. Crucially, hold for more than twelve months and the gain is tax free, regardless of the amount.

That exemption is the single most valuable feature of German crypto taxation, and it exists because the asset is treated as a private asset rather than as an investment product.

Why a fund wrapper is a different question

The one-year exemption in section 23 applies to private disposal transactions in private assets. A fund interest is a different kind of holding, and income and gains from investment products are dealt with elsewhere in the Income Tax Act, under the rules for capital income rather than under section 23.

The practical consequence for a German investor is that the exemption you would have had on the coins is not something you should assume carries over to a wrapper holding those coins for you. Whether and how a specific product is taxed depends on what the product legally is, where it is domiciled, and how German investment fund taxation treats it, which is a genuinely technical question with different answers for different products.

So the honest position is not "ETFs are taxed at X". It is that the section 23 route and the capital income route are different routes, and a product that looks equivalent in exposure can be very different in outcome.

The comparison that actually matters

Set the two side by side on the facts that drive German tax:

• Holding period. Direct: more than twelve months makes the gain tax free regardless of size. Wrapper: do not assume the same clock exists.
• The 1,000 euro Freigrenze. Direct: total private disposal gains below 1,000 euros in the year are tax free, but it is an exemption limit not an allowance, so exceeding it makes the entire gain taxable. This threshold belongs to the section 23 route.
• Cost basis. Direct: Germany uses FIFO for private disposal transactions, which usually helps, since the oldest units go first and are the most likely to be past twelve months.
• Rewards. Direct: you can stake or lend, taxed as other income under section 22 no. 3 at the euro value on receipt with its own 256 euro Freigrenze. The BMF has clarified that staking or lending does not extend the one-year holding period to ten years.
• Custody and records. Direct: you carry the documentation burden, and the March 2025 BMF letter expects wallet level records with timestamps for each reward. Wrapper: the provider does the record keeping.

Where it lands on the return

Direct crypto goes on Anlage SO through ELSTER, for section 23 private disposals and section 22 income. Investment products are reported through the sections for capital income instead. That difference in where it goes on the form is a useful reminder that the two are not the same regime.

The decision

If the one-year exemption matters to you, and for a long term German holder it usually should, then the wrapper question is not primarily about fees or convenience. Confirm the actual German tax treatment of the specific product with a Steuerberater before choosing on the basis of familiarity, because the exemption you would be giving up is unusually valuable.

Our bitcoin tax guide covers direct holdings, and German crypto tax covers the framework.

General information, not tax advice. Rules change and depend on your circumstances. Confirm the current position with the relevant tax authority or a qualified tax professional.