Germany to end tax-free Bitcoin holding period for crypto purchased after December 31, 2026

A draft bill from Germany's Federal Ministry of Finance proposes ending the country's popular tax-free perk for long-term cryptocurrency holders. Under the plan, assets purchased after December 31, 2026, will face a flat 25% withholding tax plus a solidarity surcharge, totaling an effective 26.375% rate regardless of the holding period. The ministry expects the policy to generate €160 million in 2028 and €350 million annually by 2031, though the bill must still pass parliamentary approval.

German crypto tax law change

• ▪Under the proposed German draft bill, cryptocurrency gains would be taxed under Germany's flat withholding tax regime, or Abgeltungsteuer, similar to traditional stocks and dividends.
• ▪A draft bill from the German Federal Ministry of Finance proposes to end the tax-free status of cryptocurrency gains on assets held for more than 12 months.

December 31, 2026 cutoff date

• ▪The proposed German tax changes would apply to cryptocurrencies acquired after December 31, 2026, while assets purchased before this date would retain their current tax-free status after a 12-month holding period.
• ▪German investors who purchase and hold cryptocurrency before the December 31, 2026 cutoff date will remain subject to the historical 12-month tax-free holding rule.

Flat withholding tax rate

• ▪Under the proposed German tax rules, short-term cryptocurrency traders who are currently taxed at personal income tax rates up to 45% would see their tax rate reduced to approximately 26%.
• ▪The proposed German tax regime would levy a flat 25% withholding tax plus a 5.5% solidarity surcharge, resulting in an effective tax rate of 26.375% on cryptocurrency gains.

Implementation timeline for exchanges

• ▪Cryptocurrency providers in Germany would be permitted to use customer-supplied purchase prices and acquisition dates for tax calculations, but would apply a flat 25% tax if no records are provided.
• ▪The proposed German tax law would take effect in January 2027, with cryptocurrency exchanges and providers required to automatically withhold taxes starting in 2028.

Revenue projections through 2031

• ▪The German Federal Ministry of Finance expects annual tax revenues from the proposed cryptocurrency tax changes to reach approximately €350 million ($407.35 million) by 2031.
• ▪The German Federal Ministry of Finance projects the new cryptocurrency tax rules will generate approximately €160 million ($186 million) in additional tax revenue in 2028.

Policy rationale from ministry

• ▪The proposed German tax draft must still be approved by the cabinet, the Bundestag, and the Bundesrat before becoming law, following a previous rejection of a similar tax attempt in May.
• ▪The German Federal Ministry of Finance stated in its draft report that the current tax exemption unfairly rewards speculation while hard-earned income and capital gains are taxed.