The German government has prepared a draft bill that would overhaul the taxation of bitcoin, Ethereum and other crypto assets from Jan. 1, 2027. The proposal matters for investors because profits from covered assets acquired after Dec. 31, 2026, would be taxed regardless of how long they are held.

German outlet WELT reported details of the proposal after obtaining a document from Germany’s Ministry of Finance.

Proposed tax treatment

Under the draft, profits from the sale of so-called exchange crypto assets would be taxable regardless of the holding period. Income from sales, lending and passive staking would be classified as capital income and taxed under Germany’s Abgeltungsteuer rules.

Germany currently generally exempts profits from the sale of crypto assets held for more than 12 months. Profits on assets sold during the first year are taxed at the investor’s individual income tax rate.

The government attributed its proposed change to the crypto market’s growing role. The draft’s authors argued that high liquidity, speculative use and the absence of wear and tear make crypto assets more similar to traditional financial investments than to ordinary economic goods.

The proposed rules would primarily cover bitcoin, Ethereum and other crypto assets used as a means of exchange. NFTs, security tokens and some other crypto assets that provide, or are intended to provide, real value would remain under the current rules. The draft also provides an exception for certain types of stablecoins.

Earlier holdings would retain current treatment

A transitional provision would apply to assets purchased by the end of 2026. The new rules would cover only crypto assets purchased or received after Dec. 31, 2026, while assets acquired earlier would remain subject to the current tax regime.

Investors holding bitcoin or other crypto assets acquired by that deadline would therefore remain eligible for the tax exemption after a one-year holding period. The grandfathering provision would also apply to income from traditional lending and passive staking received after Dec. 31, 2026.

Platforms would begin withholding tax in 2028

Although the proposed tax rules would take effect on Jan. 1, 2027, trading platforms would receive an additional transition period. The first withholding of capital gains tax on crypto-asset sales is scheduled for Jan. 1, 2028.

Crypto providers would be required to withhold tax from clients’ income. Calculating profits may be complicated when investors buy and sell assets across multiple platforms.

In those cases, platforms could use information supplied by taxpayers about the purchase price and acquisition date. If those details cannot be established, the draft provides an alternative mechanism under which 50% of the proceeds from the sale of exchange crypto assets would be withheld.

Finance Ministry projects additional revenue

Germany’s Ministry of Finance expects the rules to generate additional tax revenue in the triple-digit millions. It projects about €160 million in additional revenue in 2028, rising to roughly €350 million annually by 2031.

The draft remains at an early stage of interdepartmental coordination, and its provisions may change during the legislative process.

At the end of June 2026, European Union countries had issued 244 licenses under the Markets in Crypto-Assets framework, with Germany accounting for one-quarter of the permits.

Source: Incrypted