- A draft bill would tax crypto profits as capital income at a flat 25%, ending Germany’s tax-free treatment for long-held coins.
- The rule applies only to assets bought from January 1, 2027.
- Exchanges would withhold the tax automatically at the source from 2028.
- The measure is still a draft and has not cleared the Bundestag or Bundesrat.
Germany’s Federal Ministry of Finance has drafted a bill that would tax cryptocurrency profits the way it taxes stock gains, applying a flat 25% withholding levy from 2027 and dismantling the one-year holding period that currently lets investors sell Bitcoin without paying anything. The draft pulls crypto out of the “private sale transaction” category under Section 23 of the Income Tax Act and drops it into the capital income regime, the same bracket that already covers shares and dividends. Automated collection through exchanges would follow a year later, in 2028.
How BaFin’s early embrace now works in reverse
For years Germany wore the label of one of the friendliest countries in the world for digital assets, and it earned that reputation at the institutional level. The Federal Financial Supervisory Authority, BaFin, classified crypto as financial instruments and built a licensing framework for corporate custodians well before the EU rolled out its MiCA rules. Deutsche Bank and DZ Bank moved into retail crypto trading and custody, local Sparkassen positioned themselves to hold wallets for ordinary savers, and German law lets institutional Spezialfonds, which steer trillions in pension and corporate capital, put as much as 20% of a portfolio into crypto.
The tax-free-after-a-year rule was the retail half of that welcome. It gave individual holders a reason to buy and sit tight, and it became one of the most cited perks of holding crypto from Germany. The draft now takes that specific perk off the table for future purchases while leaving the institutional plumbing untouched. Retail patience loses its reward; the corporate on-ramps stay open.
How a single 25% rate reshuffles who pays more
Under today’s rules the outcome depends almost entirely on how long someone sits on a coin. Hold for more than a year and the gain is tax-free. Sell inside that window and the profit gets taxed at the seller’s personal income rate, which climbs to 45% at the top plus the solidarity surcharge. The new structure erases that split and sets one rate for everybody.
That flat 25% works out to 26.375% once the 5.5% solidarity surcharge is added on top. A day trader who was staring at a 45% marginal bracket sees the ceiling drop hard. The patient holder who paid nothing watches the floor rise from zero to roughly a quarter of the gain.
A December 31 purchase date now decides the tax bill
The draft draws a hard line on the calendar. Anything acquired up to and including the last day of 2026 keeps its legacy status, so the tax-free-after-twelve-months exemption survives for those positions. The flat levy reaches only coins bought from January 1, 2027 onward.
That grandfathering clause turns a single purchase date into the factor that decides which regime a coin falls under. Two identical Bitcoin holdings could face completely different treatment depending on whether they were bought in December 2026 or January 2027. It also hands long-term holders a concrete reason to weigh the timing of any fresh buys as the deadline nears.
The bill does not sweep in every token either.
The cost-basis gap that could tax the whole sale in 2028
The second phase is where the change reaches ordinary users directly. From 2028 domestic exchanges and custodian platforms would be legally required to withhold the tax automatically, deducting it before a customer ever sees the proceeds. The paperwork burden shifts onto the person moving the coins.
Anyone transferring assets between platforms would have to supply valid acquisition dates and the original purchase prices. Miss that step and the consequence is steep: without cost-basis data, the flat 25% applies to the entire transaction amount rather than to the profit alone. Someone who cashes out coins bought years earlier, yet cannot document what they paid, could be taxed on the full sum as though all of it were gain. For long-time holders with records scattered across exchanges that no longer exist, that clause is the part of the draft worth reading twice.
Why the crypto tax travels a quieter track than the wealth levy
The timing of the draft says almost as much as its content. On September 2 the Federal Cabinet signed off on a separate 2027 Income Tax Reform Act, and that document left the crypto overhaul out entirely, The crypto levy instead sits inside Klingbeil’s wider action plan against tax fraud and undeclared income, projected to raise roughly €1 billion in total, of which the crypto share is a small part.
By detaching them into their own draft, now sitting in early coordination among federal agencies, the ministry keeps them clear of a budget package that opposition parties are already fighting over. The wealth levy has drawn open hostility from pro-business and right-wing factions, and folding a crypto tax into that same fight would have handed those groups a second target on day one. There is a fiscal motive underneath the maneuvering: the Finance Ministry projects the measure will raise around €160 million in 2028, climbing to roughly €350 million a year by 2031 as automated collection matures.
The Bundestag and Bundesrat still stand between draft and law
None of this is settled. The draft has been circulated to other federal agencies for feedback, and it still has to survive committee hearings, pass the Bundestag, and clear the Bundesrat before any of it becomes law. Crypto advocacy groups have already lined up against it, and the AfD, which has gained ground in recent elections, is positioned to fight the measure as part of its wider resistance to the government’s tax agenda. The parliamentary calendar between now and 2027 leaves ample room for the rate, the cutoff date, or the carve-outs to move before enactment, and any one of those levers could be traded away in negotiation. Germany is not the only major market redrawing crypto rules for 2027. Britain finalized its crypto rulebook for that year well ahead of the German push, setting a standard against which Berlin’s version will be judged.