Germany’s Finance Ministry has drafted legislation that would impose a flat 25% tax on profits from crypto sales, regardless of how long the assets were held. The tax would be supplemented by the solidarity surcharge and would take effect on January 1, 2027.

The draft bill, prepared under Vice Chancellor and Finance Minister Lars Klingbeil and seen by Handelsblatt, would apply only to crypto assets acquired on or after January 1, 2027. Assets purchased before that date would remain subject to the current rules, meaning existing Bitcoin holders would retain the applicable exemption.

Welt first reported the plan on Tuesday, citing a departmental draft dated in mid-August.

Under Germany’s current system, crypto gains are generally tax-free if an asset has been held for at least 12 months. The Finance Ministry established that position in 2022 and extended it to coins used for staking and lending. Profits from assets sold within the 12-month period are taxed as ordinary income, with the rate reaching as high as 42% for higher earners. Critics have said that eliminating the holding-period rule would affect long-term investors more than the speculators targeted by the proposed reform.

The draft would treat crypto gains like dividends, share profits and interest. The 25% rate would be accompanied by a solidarity surcharge equal to 5.5% of the tax, resulting in an effective rate of 26.375% before church tax. The €1,000 saver's allowance would apply, and losses could be offset against gains, including gains from shares.

Income from lending and staking would also be classified as capital income, according to Welt’s account of the draft. NFTs, security tokens, some stablecoins and some real-world-asset tokens would remain outside the proposed regime.

Automatic withholding would begin in 2028

Banks and other providers would not begin withholding the tax automatically until 2028. They would then remit it directly, as they do for other forms of capital income. The delay would give platforms a year to develop the required systems.

When assets are transferred between platforms, providers could rely on purchase prices and acquisition dates supplied by customers. If customers could not provide that information, the flat tax rate would apply regardless. The treatment of transfers and missing acquisition data would therefore be among the practical details to monitor if the draft advances, particularly for taxpayers using multiple platforms.

The bill says crypto assets “increasingly represent a form of private capital investment” and argues that the reform would end their special treatment as economic goods comparable to classic cars or artworks. The ministry said, “It is unfair if hard-earned income and capital gains are taxed while profits from speculation with crypto assets remain largely tax-free.”

The government estimates that the measure would generate €160 million in revenue in 2028, rising to €350 million annually by 2031. The draft remains in early coordination within the federal government and could still change, although the Union and SPD agreed to tax crypto during summer budget negotiations. Further government coordination and the development of withholding systems will determine how the proposal’s rules are ultimately implemented.

Source: Decrypt