The tax benefit for cryptocurrencies in Germany is now in question: authorities have included a review of digital asset rules in the 2027 budget savings plan. Currently, an investor may avoid paying tax on profits if they held coins for more than 12 months, but this regime could change.
- Germany has added cryptocurrency taxation to its package of measures to strengthen the 2027 budget.
- The rule that exempts private investors from tax after one year of holding digital assets is under threat.
- If the benefit is canceled, it could influence the tax discussion across the European Union.
Why Authorities Are Revisiting Crypto Taxes
The Federal Ministry of Finance has included cryptocurrencies in the list of measures intended to help reduce the budget gap. The cabinet has already agreed on the basic parameters of the 2027 budget: expenditures are capped at 543.3 billion euros, and net borrowing is planned at 110.8 billion euros.
The main focus is on budget consolidation. The ruling coalition has agreed to save about 4 billion euros annually while simultaneously seeking new sources of revenue. This list includes plastic and sugar levies, higher excise taxes on alcohol and tobacco, stricter enforcement against tax violations, and a review of rules for crypto investors.
This is an important signal for the market: cryptocurrency is increasingly being considered by the government not as a niche tool but as a full-fledged asset in accounting, investment, and personal finance. Money that previously stayed within the crypto market may now become part of a broader tax base.
How Germany taxes cryptocurrencies.
How the Tax Benefit Works Now
Under current rules, cryptocurrency in Germany is considered private property. This rule applies to individuals, not companies. If an investor holds coins for more than 12 months, profit from the sale is not taxed. If the sale occurs earlier, income tax applies: the actual rate depends on the taxpayer’s total income and can reach up to 45% on a progressive scale.
- Holding for more than 12 months: profit from the sale of cryptocurrency by a private investor is not taxed.
- Holding for less than 12 months: profit is considered part of taxable income, and the rate depends on the person’s total income.
- Tax-free minimum: if the total profit from such private transactions does not exceed 1,000 euros per year, no tax is charged.
Tax is calculated on profit: the purchase price and related transaction costs that can be documented are deducted from the sale price. For example, if an investor bought coins for 2,000 euros and sold them after 8 months for 3,500 euros, the 1,500 euro profit is subject to income tax. If the same coins are sold after 12 months of holding, the profit is not taxed under current rules.
For partial sales, it is important to accurately determine which part of the position was sold and at what purchase price. For this, valuation methods such as FIFO, LIFO, or another approach used in tax accounting are applied. Without consistent accounting, it is easy to make mistakes in profit calculation, especially if purchases were made in several tranches.
For the average investor, the difference is fundamental. Bitcoin or another digital currency can be held as a long-term investment, and the one-year period effectively makes Germany one of the most lenient jurisdictions in Europe for cryptocurrency holders.
How to Withdraw Cryptocurrency in Germany
Withdrawing cryptocurrency to fiat usually occurs through regulated exchanges with euro transfers to a bank account, P2P transactions, crypto ATMs, or exchange services. The most straightforward option for banks is selling the asset on an exchange followed by a SEPA transfer, as it is easier to show the transaction history and source of funds for such operations.
German banks may scrutinize transfers related to cryptocurrency more closely. For large withdrawals, users may be asked to provide proof of identity, source of funds, purchase history, exchange reports, and profit calculations. If documentation is insufficient or the transaction chain appears unclear, the transfer may be delayed for further review.
Compliance requirements typically include KYC verification on the exchange, address confirmation, bank account details, and explanation of the source of funds. Therefore, it is better to collect documents on purchases, sales, and coin movements between wallets in advance before making a withdrawal.
How to Legally Reduce the Tax Burden
The main legal way to reduce the tax burden is to plan transactions based on the holding period. If coins are held by a private investor for more than 12 months, profit from the sale is currently tax-exempt. Another tool is the 1,000 euro annual tax-free minimum for private transactions if total profit does not exceed this threshold.
Careful planning of sales also helps: do not mix personal and business transactions, calculate profit for each position in advance, account for partial sales, and do not delay collecting documents until filing the tax return. Optimization must remain legal: hiding income, fictitious transactions, and deliberate miscalculation can lead to additional assessments, fines, and other consequences.
Mining, Staking, DeFi, NFT, and Tax Reporting
Cryptocurrency operations are not limited to simple buying and selling. Income from mining, staking, and DeFi operations requires separate accounting: it is important to record the date of reward receipt, its value in euros, and subsequent sale of the asset. For NFTs, financial results must also be calculated upon sale: purchase price, sale price, and documented expenses affect the final profit or loss.
The German tax authority is gaining more opportunities to audit crypto operations. Exchanges and other services may request extended user data, and new tax reporting rules increase information sharing. Hiding income is becoming riskier: fund movements can be matched with bank transfers, platform reports, and blockchain transaction history.
For cryptocurrency tax returns, you should keep:
- exchange reports;
- email notifications;
- transaction history;
- purchase and sale confirmations;
- profit and loss calculations;
- trading operation data;
- mining operation data;
- staking and DeFi operation data;
- long-term coin holding data.
Such documents should be kept for at least 10 years: this helps confirm the holding period, purchase price, sale price, and source of funds if the tax authority requests clarification.
Who Opposes Canceling the Benefit
After the end of 2025, discussions about canceling the relief became noticeably more active. Documents from the Social Democrats’ working group suggested taxing capital gains regardless of the holding period.
In the future, capital gains should be taxed regardless of the holding period.
The crypto industry reacted sharply negatively to this initiative. Matthias Steger, a member of the German Bitcoin Association board, warned: if tax arises with every sale, even everyday payments with digital assets will become taxable events.
This could become a serious problem for businesses. A regular bank transaction in euros is straightforward for accounting, but paying with cryptocurrency would require additional value fixation, profit calculation, and document retention. In such a situation, businesses may start choosing countries with a more relaxed regime, such as Portugal.
Parliament has already shown it is not ready to quickly abandon the benefit. In May 2026, the Bundestag’s finance committee rejected a similar initiative from the Green Party, which also proposed removing the tax exemption after one year of holding.
Why Germany’s Decision Matters for the Entire European Union
Germany does not have a completely unique crypto tax model, but the annual benefit is rare. Currently, a similar exemption after 12 months of holding is in effect in Portugal. Austria abandoned this approach back in 2022 and introduced a flat 27.5% tax on new investments.
Germany’s weight makes the issue much broader than national policy. It is the largest economy in the European Union and one of the main centers of European crypto regulation. If Berlin decides to tighten taxation, other countries may see this as a benchmark.
The context has also changed. Every fourth investor in Europe already owns cryptocurrency, and new tax reporting rules have come into effect. States want to better track the movement of digital assets, just as they do with fiat money, real estate, or securities.
This is not about value-added tax: the discussion is specifically about capital gains tax when selling cryptocurrency. But for users, the burden may increase not only on tax payment day. They will have to more carefully keep exchange reports, email notifications, transaction history, and data on trading, mining, or long-term coin holding operations.
The development of the discussion is being watched not only in the European Union. Investors from other countries, including Russia, are also assessing how rules are changing in major economies: the German approach often influences regulators’ sentiment and market expectations.
What Happens Next
The final fate of the benefit will become clearer after the bill is submitted to the Bundestag. For now, this is a budget plan and a political initiative, not an adopted law.
If Germany retains the current regime, the country will remain one of the most attractive European jurisdictions for long-term holders of Bitcoin and other digital assets. If the benefit is canceled, tax policy around cryptocurrencies in Europe may become significantly stricter.
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