Germany Proposes Stricter Crypto Taxation Rules

The German Federal Ministry of Finance has sent a draft bill on crypto taxation to industry associations, with the cabinet set to decide on October 14. The draft bill, titled 'Act to reform the taxation of certain crypto-assets held as private assets,' aims to change how crypto gains are taxed. Currently, gains from selling cryptocurrencies are considered private disposals under Section 23 of the German Income Tax Act, which requires a one-year holding period to avoid tax. The draft bill, however, proposes reclassifying crypto gains as income from capital assets under Section 20, eliminating the holding period requirement.

According to the draft bill, acquisitions made up to December 31, 2026, will still be subject to the one-year holding period, while acquisitions made from January 1, 2027, will be taxed under the new system. This means that investors who hold cryptocurrencies acquired before December 31, 2026, will not be affected by the tax change, while those who acquire new assets after that date will be subject to a 25% capital gains tax plus the solidarity surcharge.

The draft bill also proposes that the proceeds from staking and lending will be considered income from capital assets, subject to the same tax rate as sale gains. This means that investors who receive rewards or fees from staking or lending will have to pay tax on those proceeds. The draft bill also introduces the automatic tax deduction through platforms from 2028, where exchanges will withhold and remit tax directly.