Germany has reportedly been planning changes to its cryptocurrency tax rules.
The German Federal Ministry of Finance has proposed a 25% flat-rate tax on cryptocurrency trading profits, moving away from the current rule that allows crypto gains to become tax-free after an asset is held for more than a year.
According to the draft proposal seen by local news outlet Die Welt, the German Ministry of Finance is proposing the new tax for crypto assets acquired after January 1, 2027.
Under this proposal, profits from crypto assets would be subject to a standard 25% flat-rate tax starting in 2028. This would change the current treatment of cryptocurrency profits and would apply to assets acquired after the proposed deadline.
The draft also talks about grandfathering protections for digital assets purchased before January 1, 2027. This means crypto assets bought before the deadline may continue to be treated under the old tax rules.
The proposal is still in draft form and has not yet become a final law.
Tax-Free Rules for Long-Term Crypto Gains
Under Germany’s current law, profits from crypto assets can become completely tax-free when the assets are held for more than 12 months.
This rule has made Germany a favorable destination for some long-term crypto holders because investors who meet the required holding period can avoid tax on their crypto profits.
The proposal aims to move away from this treatment for crypto assets acquired after the January 1, 2027 deadline. Instead of becoming tax-free after being held for more than a year, profits from these future crypto purchases would be covered by the proposed 25% flat-rate tax.
This would mean that the tax treatment for future crypto purchases would be different from the current rules. However, the grandfathering protection would allow digital assets purchased before the deadline to remain under the existing treatment.
Germany Expects More Revenue from Crypto Taxation
Finance Minister Lars Klingbeil first revealed Germany’s plans for a crypto tax overhaul at the end of April earlier this year. He said at the time that Germany expected to collect an additional €2 billion, or about $2.3 billion, in revenue from crypto taxation.
The proposed changes would give Germany a different tax treatment for future cryptocurrency investments while maintaining protections for assets acquired before the proposed cutoff.
For now, the proposed 25% crypto tax remains part of the draft and has not yet become a final rule. The proposal is still being reviewed and could change before it becomes final law. The Finance Ministry may provide more details as the proposal continues to move through the process.
