For years, Germany has been one of the most crypto-friendly countries for long-term investors. Hold Bitcoin for over a year, and profits are completely tax-free. Now that advantage may be under threat.
Finance Minister Lars Klingbeil recently announced that crypto taxation would be revised as part of the 2027 federal budget. While the details are still being worked out, speculation is mounting that Germany is ready to close its famous crypto tax loophole.
Germany currently treats cryptocurrencies as private assets, similar to gold or collectibles.
Under Section 23 of the Income Tax Act, investors pay no taxes on gains if they hold assets for longer than one year. That rule helped position Germany as an attractive location for long-term crypto holders, but policymakers increasingly see the exemption as outdated and expensive.
The possible reform would likely eliminate the one-year holding period and tax crypto gains the same way stocks and ETFs are taxed. Investors could face immediate taxation when selling crypto, along with stricter reporting requirements.
Austria already moved in this direction in 2022 with the imposition of a 27.5% crypto gains tax.
Supporters of reform have argued that Germany is losing huge amounts of money.
Blockchain researcher and fintech expert Co-Pierre Georg, who serves as Director of the Frankfurt School Blockchain Center, estimates the country may have missed roughly €11.4 billion in crypto tax revenue in 2024 alone. Taxing unrealized gains has also been floated.
However, crypto companies and lobby groups have strongly opposed the idea.
Bitpanda CEO Eric Demuth says Austria’s experience shows high complexity and more bureaucracy without meaningful tax benefits. Meanwhile, the German Bitcoin Association believes the proposal is effectively a hidden tax increase targeting responsible long-term investors rather than tax evaders.
No final decision has been made yet, but the government is expected to finalize its plans by early July.
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