The German government has officially included cryptocurrency taxation reforms in its 2027 federal budget draft, aiming to scrap the current one-year holding rule that allows tax-free gains on digital assets. Under present law (Section 23 of the Income Tax Act), cryptocurrencies held for more than 12 months are treated as private assets, making profits from their sale exempt from tax. The new proposal, approved by Chancellor Friedrich Merz’s cabinet, would subject all crypto sale proceeds to taxation regardless of the holding period, ending a long-standing incentive for long-term investors.
The Bundesministerium der Finanzen (BMF) expects the measure to generate at least €1 billion annually (over $1.14 billion) as part of a broader fiscal consolidation package designed to shrink Germany’s budget deficit. The total consolidation aims to raise approximately €6.2 billion in 2027, with €3 billion coming from abolished exemptions, plus additional revenues from a new plastics tax and higher levies on tobacco and alcohol. Combating financial crime is also listed as a supporting element.
The tax crackdown coincides with the full enforcement of the European Union’s Markets in Crypto Assets (MiCA) regulation, which is expected to expand regulated access to digital assets across the bloc. Germany has been the most active issuer of MiCA licenses to crypto platforms. In May, the government introduced a requirement for crypto service providers to collect and report user data to tax authorities, signaling a broader tightening of oversight.
Politically, the proposal faces controversy. The Social Democratic Party (SPD), led by Finance Minister Lars Klingbeil, supports the increased tax burden, while the center-right CDU/CSU alliance of Chancellor Merz has generally opposed scrapping the exemption. A similar bill by the Greens previously stalled in the Bundestag. The first reading of the draft budget is expected in early September, with a second reading in mid-December, leaving room for potential amendments.
The reform would end Germany’s reputation as one of the most crypto-friendly tax jurisdictions in Europe and could influence broader EU tax policy. Both Bitcoin (BTC) and Ethereum (ETH) are explicitly cited as examples of assets that will become fully taxable, raising concerns among investors about decreased long-term holding appeal.
