Germany Weighs Crypto Capital Gains Tax, Ending One-Year Holding Exemption

• Germany’s Federal Ministry of Finance has floated ending the tax exemption on crypto held for more than 1 year, a measure tied to fiscal consolidation for the 2027 federal budget.
• Current law under Section 23 of the Income Tax Act makes long-term crypto gains tax-free; the change would make all disposals taxable regardless of holding period.
• The proposal is not yet law and must clear parliament, where lawmakers rejected a similar effort earlier this year.

Germany is weighing a crypto capital gains tax that would scrap the country’s exemption on digital assets held for more than one year, according to the Federal Ministry of Finance. The measure sits inside a broader fiscal consolidation plan for the 2027 federal budget, and it would reshape one of Europe’s most favorable crypto tax regimes.

Germany has long ranked among the most crypto-friendly jurisdictions on the continent, and the one-year exemption made it a preferred base for long-term Bitcoin holders. The move also lands as the European Union tightens crypto oversight, though taxation stays a national matter separate from the bloc’s MiCA rules on exchanges and service providers.

Under current German law, set out in Section 23 of the Income Tax Act (Einkommensteuergesetz), capital gains on cryptocurrencies held longer than 12 months are tax-free. Assets sold within a year are taxed as income at rates up to 45%, with an annual exemption for gains below €1,000. The proposal would remove the one-year threshold, turning every crypto disposal into a potential taxable event.

Advisors tracking German policy have seen this coming for months. Dr. Shobhit Navani, an advisor to government and law enforcement agencies who has sat on a think tank studying the question, flagged the direction earlier this year in an interview with CIM on crypto regulation and enforcement gaps.

“Germany is now planning, in the coming years, to introduce taxation on crypto. There is no law up till now, but they are discussing how to tax it,” Navani said.

Finance Minister Lars Klingbeil said in April that the government wants to tax cryptocurrencies differently, targeting roughly €2 billion (about $2.3 billion) in additional revenue. The crypto line appears alongside other revenue measures in the consolidation package, which addresses a wide budget gap through spending cuts and new levies on alcohol, tobacco, sugar, and plastic.

Removing the exemption would push Germany closer to Austria, which scrapped its own holding-period rule in 2022 and now applies a flat 27.5% rate regardless of how long an asset is held. Germany and Portugal remain among the few European jurisdictions that fully exempt long-term crypto gains. Industry groups, including the German Bitcoin Federation, warn that taxing every disposal could turn routine payments into taxable events and push activity toward friendlier jurisdictions.

The plan is far from settled. It must survive parliamentary debate, where lawmakers rejected a similar move to abolish the one-year exemption earlier this year. If approved, the changes would target the 2027 budget cycle, with new rules likely taking effect from January 2027. Investors and policymakers across Europe will watch the German process closely, given the country’s weight in EU crypto policy.

Editorial Note: Reported and edited by the Crypto India Magazine editorial team. We use AI tools to assist with research and drafting; every article is reviewed and fact-checked by our editors.

Interested in advertising with CIM? Talk to us!