Germany is advancing a plan to adjust the tax regime for crypto assets, with plans to impose a uniform tax rate of 25% on related earnings starting from 2028. This means that the local exemption arrangement that has been in place for many years, which allows tax exemption for holdings over one year, may no longer apply to newly purchased digital assets such as Bitcoin and Ethereum.
Long-term holding exempt from tax or cancellation
It is reported that this draft was prepared by the German Federal Ministry of Finance and has been submitted to other federal departments for review. According to the current version, the new rules will apply to crypto assets purchased after January 1, 2027, with the official taxation starting in 2028.
Under Germany's current system, encrypted assets held by individuals are generally considered private assets. If sold within 12 months of purchase, the profits may be subject to personal income tax; however, if held for more than one year, they are usually exempt from taxation.
The new proposal aims to incorporate crypto gains into Germany's capital income tax system, subjecting them to a uniform tax rate of 25%, similar to the tax rate for gains from stocks and other securities. As a result, the tax-free benefits associated with long-term holdings will be eliminated, but some short-term investors may face a lower tax rate than the current individual income tax rate.
The new regulations refer to asset purchases after 2027.
According to the draft, the new tax regime only applies to crypto assets purchased after January 1, 2027. It is not yet determined whether positions acquired prior to that date will continue to be subject to the old rules, and this will need to be clarified in the subsequent legislative process.
The German Ministry of Finance estimates that this measure could generate an additional tax revenue of about 350 million euros. If crypto assets are officially incorporated into the capital gains tax system, investors may also be able to use losses from stocks and other securities to offset their crypto gains in the future.
- Taxation period: Implementation will commence from 2028.
- Applicable to: Assets purchased after January 1, 2027
- Estimated revenue increase: approximately 350 million euros
For taxpayers with a personal tax rate of less than 25%, there are still arrangements under Germany's current system to apply for a lower personal tax rate to calculate their tax burden. The report also mentioned that the current tax-free threshold for private disposal transactions locally is 1,000 euros.
Differences had previously emerged within the parliament.
Earlier this year, there was debate in German politics regarding this issue. In May, the Finance Committee of the Federal Parliament rejected a similar proposal put forward by the Green Party, which also advocated for the abolition of the tax exemption for those who hold crypto assets for a period of one year.
Thereafter, Finance Minister Lars Klingbeil stated that the government plans to tax crypto assets in various ways and to incorporate this into a broader initiative to combat tax fraud and unreported economic activities. In July, he confirmed that officials were preparing specific legislation, but did not disclose any details.
Germany simultaneously strengthens encryption regulation
In addition to changes in the tax system, Germany is also strengthening the regulation of digital assets. Since January of this year, Germany has been implementing the EU's tax transparency legislation for crypto assets, which requires crypto service providers to submit customer transaction information to tax authorities.
Meanwhile, the licensed cryptocurrency services market in Germany is also expanding. As of August this year, Germany is in a leading position in terms of the number of licenses authorized under the EU's 'Regulation on Markets for Crypto-Assets', with 79 crypto-asset service providers having been approved, surpassing France and the Netherlands.
