Germany Slams Brakes on Crypto Tax Loopholes with Flat 25% Rate

Germany is moving to tax cryptocurrency gains at a flat rate of 25%, regardless of holding period. The proposed reform would bring crypto into Germany's capital-income tax system, replacing one of Europe's more favorable regimes for long-term crypto investors.

The current guidance allows Bitcoin and other crypto assets held by individuals to be taxed only when sold within one year of acquisition, with a disposal after that period generally being tax-free. However, stocks are treated differently, with investment income subject to Germany's flat Abgeltungsteuer, regardless of holding duration.

The reform would eliminate the main tax-planning variable for new investments, simplifying or reducing taxes for active investors who currently face taxation at their personal income-tax rate. However, long-term holders would lose the advantage of realizing gains tax-free once the required holding period has passed.

Existing crypto holdings are expected to receive grandfathering protection under the current draft, meaning they would remain under the existing tax rules. This would prevent the reform from retroactively changing the economics of assets bought years earlier and create two classes of otherwise identical assets.

The Finance Ministry is also planning automatic withholding by crypto service providers, starting in 2028, which would give platforms additional time to adapt their systems. The government expects this system to generate approximately €160 million in additional tax revenue in 2028, rising to roughly €350 million by 2031.