Germany is currently discussing a significant reform of the taxation of crypto assets held by private individuals. The proposed reform (which explicitly refers to a reform of taxation on crypto assets such as Bitcoin) is mentioned in the draft 2027 federal budget and financial plan until 2030, approved by Germany’s federal cabinet in July 2026.
Current German tax treatment
Under current German rules, crypto assets held as private assets are generally treated as private disposal transactions.
In simplified terms:
| Holding period | Current tax treatment |
|---|---|
| Sale within 1 year after acquisition | Taxable at the individual income tax rate |
| Sale after more than 1 year | Generally tax-free |
This means that short-term gains may be taxed at the investor’s personal income tax rate. Depending on the individual tax situation, this rate can be up to 45% plus solidarity surcharge, and, where applicable, church tax.
In contrast, gains from crypto assets sold after the 1-year holding period are generally tax-free. This has made Germany relatively attractive for long-term private crypto investors.
Planned reform
According to the government draft, crypto assets held as private investments may in future be treated as investment income. As a result, gains from the sale of crypto assets would be taxable regardless of the holding period.
This would be a major system change: the current 1-year holding period would no longer lead to tax exemption.
At the same time, the applicable tax rate could change. In Germany, investment income is generally subject to a separate flat tax regime. The tax rate is 25% plus solidarity surcharge, resulting in an effective tax burden of approximately 26.4%, plus church tax where applicable. If crypto gains were brought into this regime, they could be taxed at this lower flat rate instead of the investor’s individual income tax rate.
Illustrative example
A private investor buys Bitcoin for EUR 50,000 and sells it for EUR 80,000. The capital gain is EUR 30,000.
| Scenario | Current tax treatment | Possible future tax treatment | Estimated tax burden | Effect |
| Sale after 8 months | Taxable at the individual income tax rate (e.g. 42%) | Taxable under the flat tax regime (approx. 26%) | EUR 12,600 vs. EUR 7,800 | approx. EUR 4,800 lower |
| Sale after > 1 year | Generally tax-free | Taxable under the flat tax regime (approx. 26%) | EUR 0 vs. EUR 7,800 | approx. EUR 7,800 higher |
This example shows the two-sided effect of the proposed reform: short-term traders may benefit from a lower flat tax rate, while long-term holders may lose the current tax exemption after the 1-year holding period.
Uncertainty and transition rules
The reform may create practical uncertainty. It is currently unclear when the new rules would apply, how existing holdings would be treated, and whether there will be grandfathering or transition rules.
This is particularly relevant for investors who have already held crypto assets for more than one year and may have relied on the current tax exemption when making their investment decision. Personally, I assume that these individuals are protected by the principle of legitimate expectations and are subject to the old regulations for existing investments.
Key practical point: documentation
Proper documentation becomes even more important. Investors should be able to evidence when specific crypto assets were acquired, at what acquisition cost, and when they were sold or exchanged. Depending on the final wording of the reform and any transition rules, the acquisition date of each coin or token may become highly relevant.
DAC8 and increasing tax transparency
The proposed reform should also be seen in the broader context of increasing tax transparency and enforcement. At the EU level, DAC8 (the 8th amendment to the EU Directive on Administrative Cooperation), requires crypto-asset service providers to report certain information on crypto transactions to tax authorities. This will further increase the amount of data available to tax administrations and make it easier to compare declared crypto gains with information reported by platforms.
In addition, Germany’s July 2026 action plan against tax and financial crime expressly refers to blockchain analysis as an investigative tool and to a stronger focus on concealment services for crypto assets.
For taxpayers, the practical message is clear: crypto transactions are becoming increasingly transparent. Proper documentation and complete tax reporting are therefore more important than ever.
Conclusion
Germany’s crypto reform could benefit short-term traders but it will likely be disadvantageous for long-term holders. With DAC8 and stronger enforcement crypto taxation is also becoming much more transparent. Investors should therefore monitor the legislative process and keep their transaction documentation in order. The tax-free crypto exit may be closing; the documentation window is not.