Germany Proposes 25% Flat Tax on Crypto Gains from 2027
The German Finance Ministry has drafted a bill that would introduce a 25% flat tax on profits from the sale of cryptocurrencies, effective from January 1, 2027. This move marks a significant shift in the country's tax policy, which currently exempts long-term investors from paying taxes on their crypto gains. The proposed law would treat crypto assets as a form of private capital investment, subjecting them to the same tax rules as other capital income.
Key Provisions of the Draft Bill
The draft bill, seen by Handelsblatt, would impose a flat 25% tax on profits from the sale of cryptocurrencies, regardless of how long the asset was held. This means that anyone who buys cryptocurrencies from 2027 onwards would be subject to the new tax regime. However, individuals who already hold cryptocurrencies would be exempt from the new tax, as long as they acquired them before 2027. The current tax rules, which exempt long-term investors from paying taxes on their crypto gains, would remain in place for assets acquired before 2027.
The proposed tax would be treated as a form of capital income, similar to dividends, share profits, and interest. This means that the tax would be subject to a solidarity surcharge of 5.5%, making the effective tax rate 26.375% before church tax. The €1,000 saver's allowance would still apply, and losses could be offset against gains, including those on shares.
Exemptions and Exceptions
Not all cryptocurrencies would be subject to the new tax regime. NFTs, security tokens, some stablecoins, and some real-world-asset tokens would be exempt from the tax. Additionally, income from lending and staking would be treated as capital income, rather than ordinary income.
Automatic withholding would not start until 2028, when banks and other providers would remit the tax directly, as on other capital income. This delay would give platforms a year to build systems to handle the new tax regime. Providers could rely on purchase prices and acquisition dates supplied by customers when assets move between platforms. If a customer cannot provide this information, the flat rate would apply regardless.
Revenue Projections and Rationale
The draft bill argues that crypto assets have outgrown their treatment as a special case. The ministry claims that it is unfair if hard-earned income and capital gains are taxed while profits from speculation with crypto assets remain largely tax-free. Revenue projections suggest that the new tax would generate modest revenue of €160 million in 2028, rising to €350 million a year by 2031.
Implications and Next Steps
The draft bill is still in early coordination within the federal government and could change. However, the Union and SPD agreed to tax crypto during summer budget negotiations, suggesting that the proposal has a strong foundation. If the bill is passed, it would mark a significant shift in the country's tax policy, treating crypto assets as a form of private capital investment. This could have implications for the crypto market, as investors may need to reassess their tax strategies and consider the potential impact of the new tax regime on their investments.
What to Watch Next
The fate of the draft bill will be closely watched in the coming months. If the bill is passed, it would be implemented from January 1, 2027, and would subject profits from the sale of cryptocurrencies to a 25% flat tax. Investors would need to be aware of the new tax regime and adjust their strategies accordingly. The impact of the new tax on the crypto market would also be closely monitored, as it could have significant implications for the industry.
