- Germany plans to abolish the tax exemption for crypto investors who hold for more than a year.
- The move has been criticized by industry leaders who claim that it will make crypto payments practically impossible.
The German government plans to abolish its tax-free treatment of investors who hold their crypto for more than a year, local media has revealed.
A Tuesday report by leading outlet Der Spiegel claimed that the government is exploring a “modified taxation on cryptocurrencies” as part of a wider effort to boost revenue. Sources within the government told another local outlet that the changes will include abolishing the tax exemption for investors who hold their crypto for more than a year.
The sources revealed that Chancellor Friedrich Merz and Finance Minister Lars Klingbeil have finalized the plan, although the proposal has yet to be made public. They expect it to be passed by the Federal Cabinet this week and to take effect soon after.
Der Spiegel adds that the taxation reforms are not specifically targeting crypto and are aimed at covering a budget shortfall, expected to hit €98 billion this year.
The End of an Era for Germany’s Bitcoin Industry
Germany has remained one of the few major economies with this exemption, attracting long-term investors and boosting growth in the local Bitcoin industry. However, some leaders have long opposed it and have unsuccessfully attempted to have it scrapped.
The Social Democratic Party (SPD) reportedly pushed to abolish the exemption last year as part of its coalition negotiations. When the CDU/CSU pushed back against it, the SPD came back with a new strategy paper advocating higher taxes on crypto sales and calling for the adoption of the digital euro; the proposed taxes were also rejected.
The CDU/CSU has consistently fought back against the new crypto taxes. Speaking in December, CDU’s Lukas Krieger called for legal certainty for Bitcoin holders, adding that the party “continues to clearly advocate for maintaining the one-year period for tax-free profits.”
Olav Gutting, another CDU member of the Bundestag, stated last month:
“The abolition of the one-year holding period for capital gains from cryptocurrencies is not stipulated in the coalition agreement. From the perspective of the CDU/CSU parliamentary group, there is no reason to change the established regulation.”
The local crypto sector has fought back against the looming taxation changes. The German Bitcoin Association, known locally as the Bitcoin Bundesverband, argues that it would be unconstitutional to tax private increases in wealth for crypto alone. Additionally, the proposed changes would drop the top rate for short-term trading from 48% to 25%, encouraging speculation over long-term holding.
The changes would also result in Germany losing its competitive edge in the European crypto landscape, the organization argues, stating:
“Companies, developers and start-ups working on Bitcoin or blockchain technologies could move away – a clear disadvantage in the competition between European locations.”
Crypto taxation continues to be a divisive policy issue globally. As we reported, Brazil recently shelved its tax framework, with the administration fearing it could alienate a sizable portion of the voters. South Korea also revealed it would scrap its planned 22% tax, which had been postponed three times in the past few years. Meanwhile, American lawmakers are exploring a tax exemption on small Bitcoin transactions to boost crypto payments.
