Germany Proposes 25% Tax on Cryptocurrency Gains Starting 2027

Overview

• A draft bill proposes a 25% tax on profits from cryptocurrency sales, effective January 1, 2027, along with a solidarity surcharge.
• The tax applies only to assets acquired after the implementation date, leaving existing holdings under current tax rules.
• From 2028, banks will automatically withhold taxes on crypto transactions.

Germany is set to introduce a flat tax rate of 25% on profits from cryptocurrency transactions, as outlined in a draft bill by Vice Chancellor and Finance Minister Lars Klingbeil. This proposal, reported by Welt and based on a departmental draft from August, is scheduled to take effect on January 1, 2027.

The new tax will target cryptocurrencies purchased after this date, meaning that current holders will not face new taxation on assets acquired before 2027. Currently, individuals are exempt from taxes on crypto gains if assets are held for over a year, a policy established in 2022. Gains realized within this period are taxed as regular income, which can be as high as 42% for top earners. Critics argue the removal of the holding period disproportionately impacts long-term investors.

Under the proposed legislation, cryptocurrency gains would be taxed similarly to dividends and capital gains, including a 5.5% solidarity surcharge, resulting in an effective tax rate of 26.375% before church tax. A €1,000 allowance for savers is included, along with provisions to offset losses against gains from other investments.

Income from staking and lending will also be classified as capital income, though certain assets such as NFTs and specific stablecoins will be excluded from this taxation framework.

Implementation Timeline

The automatic withholding of taxes will begin in 2028, giving banks and financial institutions time to set up necessary systems. When transferring assets, platforms can use the purchase prices and acquisition dates provided by users; if this information is unavailable, the flat tax rate will be applied.

The bill emphasizes the need to update the treatment of cryptocurrencies, recognizing them as private capital investments rather than special economic goods. The Ministry of Finance argues that it is inequitable for earned income and capital gains to face taxation while profits from speculative crypto activities remain largely untaxed.

Projected revenue from this tax is expected to start at €160 million in 2028, potentially rising to €350 million annually by 2031. The draft bill remains in preliminary stages and may see changes, although there has been prior agreement between the Union and SPD on taxing cryptocurrencies during budget discussions this summer.