Germany's cabinet weighs bill to end tax-free crypto gains

Germany's finance ministry has drafted a law to end the tax break that lets people sell crypto tax free after holding it for one year. Gains would instead be taxed as capital income. The cabinet was set to review the draft on October 14.

Published on September 30, 2026, the draft carries a long name: the law to reform the taxation of certain crypto assets held as private wealth. Big Four firm PwC, law firm A&O Shearman and advisers Grant Thornton have all read the text and reached the same core finding. Coins such as Bitcoin (BTC) and Ether (ETH) would move out of Germany's private-sale rules and into the flat tax that already covers shares and dividends.

What the draft would change

Right now, Germany does something few large economies do. Holding crypto for more than a year currently makes any gain on sale tax free. The draft scraps that one-year rule for coins bought or received from January 1, 2027. Any sale after that date is taxable, no matter how long the coin was held.

Coins already held get a carve-out. Under the draft, anything bought on or before December 31, 2026 stays under today's rules, so the one-year exemption still applies to those coins. A&O Shearman splits holdings into older ones, bought by the end of 2026, and new ones acquired later. crypto.news noted the draft's treatment of this grandfathering is not yet fully settled.

The new tax would be the flat rate Germans already pay on investment income: 25 percent, plus the 5.5 percent solidarity surcharge on top, for an effective 26.375 percent. That is a cut for active traders. Short-term crypto gains can be taxed today at personal income rates reaching about 45 percent, so moving them to the flat rate lowers the bill for people who trade within a year. Long-term holders are the ones who lose out.

Staking, lending and missing records

Income from lending coins or from passive staking would also count as capital income under the draft, A&O Shearman said. From January 1, 2028, German crypto platforms and custodians would withhold the tax at source, the way banks already do on stock dividends. That falls a year after the rules start, which is why some reports cite 2027 and others 2028.

One detail will sting investors with patchy paperwork. Where a platform cannot establish what someone paid for a coin, the draft sets the taxable base at 50 percent of the sale price, A&O Shearman and Grant Thornton both reported. For securities today the comparable figure is 30 percent. Records will matter more.

Not everything is swept in. E-money tokens issued under the EU's MiCA rules are excluded, and NFTs, security tokens and tokens that stand for real-world assets stay taxed on what they represent, according to A&O Shearman's reading.

Germany joins a wider European squeeze

Berlin is not alone. A French parliamentary committee recently backed a crypto exit tax on unrealized gains, and Greece has proposed a 10 percent tax on crypto profits with a small annual exemption. Each country is drafting its own answer to the same question: how to tax a fast-growing asset class its tax codes were not built for.

Revenue from the change would be modest. The ministry estimates about 160 million euros in extra tax in 2028, rising to roughly 350 million euros a year by 2031, figures reported by crypto.news and FinanceFeeds. Finance Minister Lars Klingbeil first signaled the direction during the 2027 budget presentation in April 2026 and confirmed in July that a concrete bill was coming.

A fight that is far from over

This draft is not law, and it may not survive in its current form. The cabinet vote on October 14 had not been confirmed by official government pages at the time of writing, and even cabinet approval only sends the bill to the Bundestag and the Bundesrat, which both have to agree. FDP lawmaker Frank Schaeffler criticized how little time industry groups were given to respond, FinanceFeeds reported.

Resistance is already loud. On October 8 the Bundestag rejected a separate opposition bill from the Greens that would have scrapped the holding period and taxed gains at full personal rates, by 445 votes to 132, according to FinanceFeeds and German outlet CryptoTicker. Four days later, a petition to keep the one-year exemption, filed by Nicole Nowak and signed by 44,439 people, went before the Bundestag's petitions committee on October 12.

What to watch

Watch the cabinet first. If ministers approve the draft, the text moves to parliament, where the start date and the 2026 cutoff are the two things most likely to shift. For anyone holding coins bought before 2027, the key question is whether that grandfathering clause survives the negotiations. Until the Bundestag and the Bundesrat vote, nothing changes for current holders.