Germany Plans 25% Flat Tax on Crypto Gains from 2028

major change to Germany crypto tax rules

Germany is preparing a sweeping change to crypto taxation that would bring digital asset gains under the country's capital income tax, Abgeltungsteuer, and impose a uniform 25% levy on eligible crypto profits beginning in 2028. The draft legislation, reported by Der Spiegel and circulated within federal ministries, targets crypto acquired after January 1, 2027. If adopted, the proposal would abolish the longstanding one-year tax exemption for many privately held cryptocurrencies and align crypto gains with gains from stocks and other securities.

What the draft proposes

Under the draft, realized gains from cryptocurrencies bought from January 1, 2027 onward would be treated as capital income subject to the flat 25% Abgeltungsteuer. The change would place Bitcoin, Ether and other digital assets in the same tax bracket currently used for share trading and many securities. The new mechanism would be implemented in 2028, after the draft completes inter-ministerial review and moves through the cabinet and parliamentary stages.

Key operational points in the draft include:

• Applicability to crypto purchases made after January 1, 2027.
• Tax take effect in 2028.
• Retention of a personal allowance threshold, historically set at €1,000 for private disposal transactions.
• New ability to offset crypto gains against losses from stocks and other securities once under the capital income tax regime.
• Unresolved treatment for crypto acquired before 2027; lawmakers must decide how to handle previously purchased holdings as the bill advances.

How this alters existing rules and investor impact

Currently, Germany treats privately held cryptocurrencies as private assets that fall outside the flat capital income tax. Crypto sold within 12 months of acquisition is taxed at the seller s personal income tax rate, which can reach up to 45% for top earners. Critically, assets held for longer than one year have generally been tax-exempt.

The proposed 25% flat tax would end this one-year tax-free holding period for assets covered by the new rules. That has two principal effects:

1. It removes the tax-free incentive for many long-term retail holders. Investors who previously relied on the 12-month exemption to realize tax-free Bitcoin or Ether gains could now face taxation at 25% on profits for assets inside the new regime.
2. It can reduce tax bills for some short-term traders. Individuals whose personal income tax rate is above 25% but currently sell crypto within 12 months would see a potential reduction in tax compared with being taxed at their marginal rate.

The draft also provides a path for taxpayers whose personal income tax rate is below 25%: they could request a Günstigerprüfung, a tax assessment system designed to determine whether applying an individual s lower personal rate would yield a smaller tax liability than the flat rate.

Loss offsetting and accounting consequences

A major technical change is that crypto gains could be offset against losses from stocks and other securities under the Abgeltungsteuer framework. This creates new tax-loss harvesting possibilities and will affect how investors and tax advisors calculate net taxable capital income. Integrating crypto into the capital income tax system may also require custodians, exchanges, and tax-reporting services to adapt their reporting and withholding processes.

Political context and legislative history

The proposal follows months of debate and earlier parliamentary efforts. In May, the German Finance Committee rejected a Green Party motion to remove the long-term holding exemption, a sign of the political complexity around crypto tax reform. Parties including CDU/CSU, SPD, and AfD previously opposed that specific motion for varied reasons, while Die Linke supported it with reservations.

Finance Minister Lars Klingbeil has previously signaled a desire to change crypto taxation. During the 2027 federal budget presentation, Klingbeil said the government intended to tax cryptocurrencies differently, linking the initiative to a broader package of measures aimed at strengthening enforcement against financial and tax crime and raising new revenue.

Political resistance remains. The AfD has publicly supported preserving the 12-month holding rule and has previously presented Bundestag proposals to maintain it. Recent electoral gains by AfD in some states have returned attention to the debate, though tax policy on crypto remains a federal competence and cannot be decided at the state level.

Why the government is pursuing this change

Ministry sources cited by Der Spiegel described a fairness argument: taxing earned income and investment returns while allowing many speculative crypto gains to remain tax-free was seen as inequitable. The change is also part of a broader fiscal plan: the finance ministry estimates the crypto measure would raise roughly €350 million in additional tax revenue. That figure is modest relative to headline spending numbers but contributes to the government s multi-pronged revenue strategy for the 2027 budget.

Fiscal and market implications

The tax draft must still be coordinated across ministries and approved by the cabinet before parliamentary review. If enacted, the policy would have measurable effects on market behavior and tax compliance:

• Selling patterns: Some holders may accelerate disposals ahead of the 2027 cutoff or decide to hold pre-2027 purchases until transitional rules, if any, are clarified.
• Reporting and enforcement: The EU Crypto Asset Tax Transparency Act is already in force in Germany, requiring crypto service providers to share transaction data with tax authorities. Coupled with the change to the Abgeltungsteuer, enforcement capacity and reporting fidelity are likely to increase.
• Industry growth: Germany has become a leading EU jurisdiction for Markets in Crypto-Assets authorizations, hosting more licensed crypto asset service providers than other large members states. Clear tax rules can reduce legal uncertainty for exchanges and custodians, though higher effective tax rates may affect trading volumes.

On-chain activity in Germany underscores the potential base at stake. Chainalysis estimated roughly $24.1 billion in potentially taxable on-chain crypto activity in 2025, including payments, realized gains, and income. While that does not equate to unpaid taxes, it highlights the scale of crypto flows that tax authorities are now scrutinizing.

Timing and transitional rules

The draft specifies that the new capital income treatment applies to crypto purchased after January 1, 2027. It remains unclear whether holdings purchased before that date will preserve the existing one-year exemption or be grandfathered in under new rules. This detail is politically sensitive and will be a primary focus for lobbying by industry groups, individual investors, and political parties during the bill s legislative process.

What investors and service providers should consider

• Review positions: Investors should review their crypto portfolios to identify assets bought before and after the January 1, 2027 threshold and consider tax timing strategies in consultation with a tax professional.
• Document acquisition dates: Accurate record-keeping of buy dates, costs, and wallet transfers will be essential for determining whether an asset falls under the new regime.
• Prepare for reporting changes: Exchanges, custodians, and tax software providers should prepare for alignment with existing capital income reporting structures and for expanded reporting to German tax authorities.
• Consider Günstigerprüfung: Investors whose personal income tax rate is below 25% can prepare to request a Günstigerprüfung to assess whether their lower rate reduces tax obligations compared with the flat levy.

International context and enforcement

Germany s move is part of a broader global trend toward clarifying crypto tax regimes and improving transparency. The EU s reporting rules, plus national measures like Germany s draft, point toward greater cross-border information sharing and more systematic tax treatment of digital assets. For multinational investors and service providers, harmonized rules in major jurisdictions will help reduce compliance complexity but could increase effective taxation of realized crypto gains.

Conclusion

The draft to impose a 25% flat tax on crypto gains from 2028 represents a major shift in Germany s approach to digital asset taxation. By folding crypto into the Abgeltungsteuer, the government aims to modernize tax policy, raise revenue, and improve fairness between different asset classes. Investors, exchanges, and tax advisors now face critical choices about record-keeping, timing of disposals, and legislative engagement as the proposal moves through the review process. The treatment of pre-2027 holdings remains the key unresolved issue that will determine how far-reaching the impact will be for long-term holders of Bitcoin, Ether, and other digital assets.