Germany Plans a 25% Flat Tax on Crypto Gains From 2027
Germany's Finance Ministry has circulated a draft law that would end the country's long-standing one-year holding-period exemption for cryptocurrency and apply a flat 25% withholding tax to all crypto gains instead, starting in 2027. If passed, the proposal would fundamentally change how crypto tax in Germany works, bringing Bitcoin, Ether, and other tokens into the same tax bracket as dividends and bank interest. For anyone holding crypto in Germany right now, understanding what is proposed and what it means in practice is urgent.
How Crypto Is Taxed in Germany Today
Under the current rules, cryptocurrency held in Germany is treated as a private asset under Section 23 of the Income Tax Act (Einkommensteuergesetz). The key feature of this framework is a holding-period exemption: sell or swap crypto you have held for more than one year and any gain is completely tax-free. Sell within that one-year window and the profit is added to your other income and taxed at your personal marginal rate, which can reach up to 45% for high earners.
The one-year rule and its limits
This structure has made Germany one of the more attractive jurisdictions in Europe for long-term crypto investors. Hold long enough and you pay nothing. But it also creates complexity. Every transaction resets a clock. Swapping one token for another, spending crypto on goods, or moving assets through DeFi protocols can all trigger a taxable event if the relevant coins haven't passed their one-year anniversary. Tracking acquisition dates and cost bases across hundreds of transactions is already a significant burden, which is exactly why using a crypto tax calculator to generate an accurate crypto tax report has become standard practice for serious holders.
When staking changes the clock
German tax authorities have historically extended the holding period to ten years for crypto that generates income, such as staking rewards or lending yield. Under that interpretation, the tax-free threshold becomes harder to reach for active participants in proof-of-stake networks. The current draft does not appear to address this distinction explicitly, and clarity on how staking income would interact with the new flat rate remains one of the key open questions.
What the Draft Proposal Would Change
The Finance Ministry's draft would replace the income-tax framework for crypto disposals with a capital gains withholding tax (Abgeltungsteuer) at a flat rate of 25%, plus the solidarity surcharge and, where applicable, church tax, bringing the effective rate to approximately 26.375% or slightly above for some taxpayers. Crucially, the holding-period exemption would be abolished. A gain is a gain, whether you held the asset for two weeks or five years.
Alignment with other capital income
The Abgeltungsteuer already applies to dividends, interest, and gains from listed securities. Bringing crypto into that system would simplify one aspect of reporting: crypto profits would no longer need to be declared separately in the "private sales transactions" section of the tax return if custody is held at a regulated German broker or exchange that withholds on the investor's behalf, in the same way a German bank withholds on dividends. Whether crypto custodians would be technically required to act as withholding agents is a detail that the draft would need to resolve before passing into law.
The saver's allowance
One benefit that would likely carry over is the Sparerpauschbetrag, the annual saver's allowance. Currently set at 1,000 euros per individual (2,000 euros for married couples filing jointly), this allowance shelters a portion of capital income from the flat tax. If crypto gains are folded into the Abgeltungsteuer system, gains up to that threshold could remain untaxed each year, a modest but real benefit for smaller investors.
Who Is Affected and How Much
The impact depends almost entirely on your current holding profile and whether you were planning to rely on the one-year exemption.
Long-term holders with unrealised gains
This is the group facing the biggest change. If you bought Bitcoin in 2021, held through the bear market, and are now sitting on significant unrealised gains, you may have been counting on a tax-free disposal. Under the proposed rules, those gains would attract 25% from 2027 onward regardless of how long you've held. The question of whether there will be a transitional arrangement for assets already held beyond one year at the point the law takes effect is not yet answered in publicly available drafts. That transitional detail could be the most consequential clause in the entire bill.
Short-term traders
For active traders, the change could actually reduce the tax burden. Currently, short-term gains are taxed at personal income tax rates of up to 45%. A flat 25% cap would be meaningfully lower for anyone in the higher income brackets. That said, the loss of the one-year exemption means there's no longer a strong tax incentive to hold rather than trade, which changes the economics of longer-term position-sizing.
Smaller and occasional investors
If your annual gains stay below the saver's allowance, the practical impact may be limited. But if you've never tracked your acquisition dates or cost bases carefully because you expected long-term holdings to be exempt, you'll need to reconstruct that data to calculate taxes accurately under any regime. That reconstruction is exactly what a crypto tax calculator is built to handle.
The Legislative Timeline and What Comes Next
The draft is at the proposal stage as of September 2026. It would need to pass through the Bundestag and, depending on its scope, potentially the Bundesrat before becoming law. A 2027 effective date is tight by German legislative standards, which means the parliamentary process would need to move quickly. Public consultation, lobbying from the crypto industry, and potential amendments are all still ahead.
Practical steps to take now
Waiting to see whether the law passes before acting is a reasonable instinct, but it carries risk. Here's what German crypto holders can do in the meantime:
- Audit your holdings and acquisition dates. Know exactly which assets you hold, when you acquired them, and what you paid. If you've been relying on exchange transaction histories alone, download them now before older records become inaccessible.
- Model both scenarios. Run a crypto tax report under current rules and under the proposed 25% flat rate to understand the difference for your specific portfolio. A crypto tax calculator that supports German tax rules (private sales under EStG Section 23, FIFO or LIFO cost basis methods) is the practical tool for this.
- Consider the timing of any planned disposals. If you were planning to sell assets that have crossed the one-year mark anyway, doing so before a potential 2027 cut-off keeps those gains tax-free under current law. Seek advice from a qualified tax professional before acting.
- Watch for transitional provisions. The final bill may include grandfather clauses protecting gains on assets already held beyond one year at the point of enactment. Monitor the Bundestag's progress on the draft closely.
- Consider your staking and lending income. If the ten-year rule for income-generating crypto is abolished or modified alongside the flat rate, the calculation for those assets changes significantly.
The Broader European Context
Germany's proposal sits within a wider pattern of European governments tightening crypto tax frameworks. The EU's DAC8 directive will require crypto-asset service providers to report client transaction data to tax authorities from 2026, and CARF, the OECD's Crypto-Asset Reporting Framework, is being adopted across multiple jurisdictions. You can see how that expanded reporting is already reshaping compliance requirements by looking at how Norway's CARF rules are expanding tax-authority visibility of crypto holdings. Germany's move toward Abgeltungsteuer for crypto would align with a broader shift: tax authorities across the continent want crypto gains treated as ordinary capital income, not as a private speculative asset with carve-outs.
Also worth watching is Ireland's decision to shut crypto out of its new tax-advantaged accounts, another sign that European governments are not rushing to integrate crypto into favourable savings structures while tax treatment remains contested.
Accounting and Tax Implications at a Glance
The table below sets out the key differences between the current German regime and what the draft would introduce:
| Feature | Current rules (EStG Section 23) | Proposed rules (from 2027) |
|---|---|---|
| Tax rate on gains | Personal income tax rate (up to 45%) | Flat 25% Abgeltungsteuer (plus surcharges) |
| Holding-period exemption | Tax-free after 12 months | Abolished |
| Annual allowance | 600 euro private sales threshold (historical); gains below threshold untaxed | Likely 1,000 euro saver's allowance (Sparerpauschbetrag) |
| Reporting mechanism | Self-reported in annual Steuererklarung | Potentially withheld at source by custodian/exchange |
| Staking/lending income | Potential 10-year holding period applies | Treatment under draft not yet clarified |
Frequently Asked Questions
Will the one-year tax-free rule for crypto still apply after 2027?
Under the current draft, no. The proposal would abolish the holding-period exemption that currently makes gains on crypto held longer than twelve months completely tax-free in Germany. All gains would be subject to the flat 25% rate regardless of how long the asset was held.
What is the 25% rate and are there any surcharges on top?
The flat capital gains withholding tax in Germany (Abgeltungsteuer) sits at 25%, but the solidarity surcharge (Solidaritätszuschlag) adds a further 5.5% of the tax amount, bringing the combined rate to approximately 26.375%. Church tax (Kirchensteuer) applies on top of that for registered church members, pushing the effective rate slightly higher depending on the state.
How is crypto taxed in Germany right now, for short-term gains?
If you sell, swap, or spend cryptocurrency within twelve months of acquiring it, the gain is treated as income from private sales transactions under Section 23 of the Income Tax Act and taxed at your personal marginal rate, which can reach up to 45% for higher earners. A 600 euro annual exemption has historically applied to private sales transactions, though this should not be confused with the proposed new saver's allowance under the draft.
Does the proposal affect crypto I already hold and have had for more than a year?
That depends on whether the final legislation includes transitional or grandfather provisions. The draft as reported does not guarantee protection for gains on assets already past the one-year mark at the point the law comes into force. This is one of the most critical open questions and should be monitored closely as the bill progresses through the Bundestag.
How do I calculate my crypto taxes in Germany to prepare for this change?
Start by compiling a complete transaction history across every exchange and wallet you use, including acquisition dates, disposal dates, amounts, and euro-equivalent values at the time of each transaction. A crypto tax calculator that supports German tax rules, including FIFO or specific identification cost basis methods and Section 23 private sales categorisation, can convert that raw data into an accurate crypto tax report. Running the calculation under both the current regime and the proposed flat rate will show you exactly what the financial difference is for your portfolio, which is the foundation for any timing decision you discuss with a tax adviser.
Source: Decrypt