Germany Scraps Tax-Free Crypto Treatment, Benefits Active Traders

The German Finance Ministry is planning to end tax-free treatment for Bitcoin and other cryptocurrencies, but this move will actually benefit active traders. Currently, anyone who holds onto their coins for at least a year can avoid paying taxes on their gains. However, the new bill would treat crypto gains as capital income, subjecting them to a flat withholding tax of 25%. This rate is set to increase by 5.5% due to the solidarity surcharge, resulting in an effective tax rate of 26.375%.

The change will affect assets acquired on or after January 1, 2027. Assets bought before December 31, 2026 will remain under the current rules, which is a grandfathering provision. Crypto service providers will be required to withhold the tax automatically from January 1, 2028, giving them time to build the necessary systems.

The bill also introduces new provisions for income from crypto lending and staking, reclassifying it as capital income. Investors will receive a standard €1,000 savings allowance, and crypto losses can be offset against gains from securities, which is a meaningful improvement for those running both.