Germany to impose a flat 25% tax on crypto gains from 2027, with automatic withholding starting 2028
A draft law from the SPD‑led Finance Ministry would end the 12‑month tax‑free holding period for cryptocurrencies bought after 31 December 2026 and apply a flat 25% Abgeltungsteuer from 1 January 2027. Automatic withholding by service providers would only begin a year later.
Germany is set to overhaul the taxation of cryptocurrency gains. According to Handelsblatt, a draft law from the SPD‑led Finance Ministry would make gains from the sale of Bitcoin, Ether and other “Tauschkryptowerten” taxable irrespective of how long the assets have been held.
Background: current crypto tax treatment
Under the existing regime, private‑individual investors can sell crypto tax‑free after a holding period of twelve months. The exemption has been a distinctive feature of German capital‑gain taxation, separating digital assets from equities and funds, which are already subject to the flat 25% Abgeltungsteuer (capital gains tax).
Details of the proposed reform
The draft legislation would replace the holding‑period exemption with a flat 25% rate – the same Abgeltungsteuer that applies to stocks and mutual‑fund shares. The key parameters are:
| Parameter | Detail |
|---|---|
| Tax rate | Flat 25 % Abgeltungsteuer |
| Applicable assets | Cryptocurrencies (Bitcoin, Ether, etc.) |
| Holding period relevance | Irrelevant – tax applies regardless of holding period |
| Scope | Only assets acquired after 31 December 2026 |
| Law effective | 1 January 2027 |
| Automatic withholding | Starts 1 January 2028 |
| Source: Handelsblatt | |
The flat tax rate of 25% is explicitly stated in the Handelsblatt report (“pauschal 25 Prozent”). The law’s entry into force is set for 1 January 2027, and the automatic deduction of tax by crypto service providers is scheduled for 1 January 2028. Both dates are given without any conditional language, indicating the government’s intention to have the framework in place by the start of 2027 and the operational mechanism by the following year.
Timeline and implementation
The draft law follows a three‑step timeline:
- 31 December 2026 – cut‑off date. Crypto purchased after this day will fall under the new regime.
- 1 January 2027 – the law comes into force. From this day onward, any gain realised on qualifying crypto holdings will be subject to the 25% flat tax.
- 1 January 2028 – service providers (exchanges, wallets, custodians) are required to withhold the tax automatically at the point of sale.
Handelsblatt notes that the draft is still in “Frühkoordinierung” – early coordination within the federal government – meaning that amendments are possible before the final law is passed.
Implications for investors and open questions
For German residents who bought crypto before the 31 December 2026 cut‑off, the existing tax‑free holding period remains intact. Those acquiring assets after that date will face an immediate tax liability on any profit, regardless of whether they hold the asset for weeks or years. The shift removes the incentive to hold crypto for twelve months purely for tax optimisation.
Because the flat rate mirrors the tax on equities, the reform narrows the special tax status that has distinguished digital assets. Investors will need to factor a 25% cost into their return calculations, potentially reducing the net attractiveness of speculative crypto trades.
Several practical questions remain unanswered in the Handelsblatt piece:
- How crypto platforms will integrate the automatic withholding function in 2028, especially for cross‑border services that operate outside Germany.
- Whether any exemptions (e.g., for small‑scale private sales) will be retained, as the draft does not mention thresholds.
- How the tax authority will verify the acquisition date of assets bought on foreign exchanges.
Until the law is finalised, market participants should monitor any amendments that could alter the scope or timing. The core elements – a flat 25% rate, applicability only to assets bought after 31 December 2026, and a 2027 start date – are all confirmed by the Handelsblatt report.
In summary, Germany’s proposed crypto tax reform represents the first major policy shift since the 2018‑2020 rule that allowed a twelve‑month tax‑free holding period. If enacted, the flat 25% Abgeltungsteuer will apply from 1 January 2027, with automatic withholding kicking in a year later. Investors should prepare for the new compliance landscape while keeping an eye on the legislative process for any further adjustments.