Germany Moves to Tax Crypto Gains at 25% Regardless of Holding

• Existing crypto holdings are expected to receive grandfathering protection under the current draft.
• Automatic tax withholding by crypto service providers is planned from 2028.
• Berlin expects the reform to generate €160 million initially, rising substantially as the system matures.
• Self-custody could complicate automatic taxation because exchanges may not know an asset’s original purchase price.

Germany’s Finance Ministry is preparing to move cryptocurrency into the country’s capital-income tax system, a change that would replace one of Europe’s more favorable regimes for long-term crypto investors. Under the reported proposal, gains on newly acquired Bitcoin, Ether and other crypto assets would face Germany’s 25% flat investment-income tax, while exchanges could eventually be required to deduct the tax automatically. The plan remains subject to government coordination and parliamentary approval.

Germany Is Moving Crypto Closer to Stocks

The significance of the proposal comes from how differently Germany currently treats privately held crypto and conventional securities.

Under existing Finance Ministry guidance, Bitcoin and other crypto assets held by individuals generally fall under the rules for private sales transactions. Gains can be taxable when an asset is sold within one year of acquisition, while a disposal after that period can generally be tax-free.

Stocks work differently. Investment income is generally subject to Germany’s flat Abgeltungsteuer, with the tax treatment no longer disappearing simply because an investor holds an asset for several years.

Moving crypto into that framework would eliminate holding duration as the main tax-planning variable for new investments.

The impact is not uniform for every investor. Someone frequently trading crypto can currently face taxation at their personal income-tax rate, which may exceed 25%. A flat investment-income rate could therefore simplify or even reduce the headline rate for some active investors.

Long-term holders face the opposite outcome. Their most valuable benefit today is the possibility of realizing gains tax-free once the required holding period has passed. That advantage is what the reform would remove.

Older Holdings Could Keep Their Current Treatment

The transition provisions may become the most consequential part of the legislation.

According to Handelsblatt’s reporting on the Finance Ministry plans, crypto acquired before January 1, 2027 is expected to remain under the existing tax rules.

If retained in the final legislation, that would prevent the reform from retroactively changing the economics of Bitcoin or Ether bought years earlier.

It would also create two classes of otherwise identical assets.

A Bitcoin purchased before the transition could qualify for the old treatment, while Bitcoin acquired afterward would enter the new investment-income regime.

For investors holding coins accumulated over multiple years, purchase records would consequently become more valuable. Tax treatment could depend not simply on what cryptocurrency was sold, but on when the specific position was acquired.

That raises practical questions around accounting methods and documentation that the final rules will need to resolve.

2028 Could Change How Crypto Taxes Are Collected

The Finance Ministry is also planning a second change that receives less attention than the headline rate: automatic withholding by crypto service providers.

That mechanism is expected to begin in 2028, giving platforms additional time to adapt their systems.
Instead of leaving every investor to calculate the liability later through an annual tax return, participating platforms could become part of the collection process, bringing the experience closer to investing through a conventional German securities broker.

The government expects the system to generate approximately €160 million in additional tax revenue in 2028.

Annual proceeds are projected to increase to roughly €350 million by 2031 as the regime becomes established.

Those estimates make the withholding infrastructure particularly important. The reform is not solely about changing what investors owe. Berlin is also trying to make collection more systematic.

Self-Custody Creates a Problem Stock Brokers Rarely Face

Applying brokerage-style withholding to crypto becomes complicated when assets leave an exchange.

Consider an investor who buys Bitcoin on one platform, transfers it into a hardware wallet and moves it to another German exchange several years later.

The second exchange can see the Bitcoin arriving, but it may not automatically know the original acquisition price. Without that cost basis, accurately calculating the taxable gain becomes difficult.

Crypto-to-crypto transactions create another layer of complexity. Germany’s existing guidance already contains detailed rules covering exchanges between digital assets, acquisition costs and transaction documentation.

A workable withholding system will therefore need a mechanism for transferring or reconstructing tax information alongside assets that can move freely between custodians.

That is fundamentally different from a share portfolio that remains inside the regulated brokerage system.

For investors, record keeping could remain important even after exchanges begin deducting tax automatically.

DAC8 Gives Tax Authorities More Transaction Visibility

The reform also arrives as European tax authorities gain substantially greater access to crypto transaction information.

The EU’s DAC8 framework expands automatic tax reporting to crypto-asset service providers, requiring covered businesses to collect and report information on relevant transactions and users. Germany has already moved to implement the framework nationally.

DAC8 and the proposed tax overhaul solve different problems.

One determines the tax treatment of investment gains. The other improves the information available to authorities.

Together, however, they push German crypto investing toward the infrastructure already familiar in conventional finance: standardized reporting, identifiable cost bases and greater involvement from regulated intermediaries.

Self-custodied assets remain transferable outside that infrastructure, but moving them back through regulated platforms will increasingly create reporting records.

The Final Rules Matter More Than the Headline Rate

The Finance Ministry’s plan is not yet enacted law, and several details can still change before implementation.

Grandfathering is particularly important because altering the transition date or eligibility rules could materially change the effect on existing investors. The treatment of transferred assets and the information exchanges must collect before calculating tax also require clarification.

Those implementation details could determine whether the reform produces unusual behavior before the transition. Investors expecting to continue holding crypto for years may have a tax incentive to establish positions while they can still qualify for the existing regime, provided the reported grandfathering survives unchanged.

The longer-term question is more operational. Germany is trying to apply a securities-style tax system to assets that can move between exchanges, blockchains and private wallets without a broker accompanying every transaction.

Whether the reform works cleanly will therefore depend less on the 25% headline rate than on something much less visible: whether tax information can move as efficiently as the crypto itself.