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This article was written by
Certified Tax Advisor, Lawyer, Director, National Office Tax & Legal
Certified Tax Advisor, Director, National Office Tax & Legal/Quality Assurance
Senior Consultant, National Office Tax & Legal
With the ministerial draft bill circulated to the associations on September 29, 2026, the German Federal Ministry of Finance (Bundesfinanzministerium; BMF) is planning a fundamental reform of the taxation of crypto-assets held as private assets. The associations have been invited to submit comments by October 6, 2026; consideration by the Federal Cabinet is scheduled for October 14, 2026. Certain crypto-assets used as a means of exchange are to be classified in future not as private disposal transactions under Sections 22 and 23 of the German Income Tax Act (Einkommensteuergesetz; EStG), but as investment income under Section 20 EStG. This is justified by their speculative use, high liquidity and lack of depreciation.
The proposed rules are intended to cover so-called exchange crypto-assets, i.e. crypto-assets within the meaning of the Markets in Crypto-Assets Regulation (MiCA) that are accepted as a means of exchange without being issued or guaranteed by a central bank or other public authority. The draft cites Bitcoin and Ether as examples and therefore not as an exhaustive list; comparable crypto-assets are also to be included. In practice, classification must be assessed on a case-by-case basis. Further clarification by the BMF would be welcome. Claims for the return of exchange crypto-assets made available to another party are treated in the same way.
Non-fungible tokens, security tokens and other crypto-assets representing a real asset or a right are not intended to be covered; the rules applicable to the represented asset will continue to apply to them. These may include, for example, tokens linked to precious metals or real estate. Regulated e-money tokens are likewise excluded, although they account for only a small proportion of the crypto-assets generally referred to as stablecoins.
Current investment income is to include income from making exchange crypto-assets available to another party and from participating in transaction processing. This would include, in particular, traditional lending, passive staking and corresponding decentralised business models.
Capital gains are to be taxed as investment income irrespective of the holding period; for covered newly acquired assets, the current tax exemption after one year will cease to apply. The proposed tax is generally 25% withholding tax on investment income, plus solidarity surcharge and, where applicable, church tax. In future, losses will be subject to the offsetting regime under Section 20 (6) EStG; Section 23 EStG will remain applicable to existing assets. No separate ring-fencing regime for crypto losses is envisaged. The precedence of business income likewise remains unaffected.
Where exchange crypto-assets are received free of charge or in return for services not treated as current crypto income, their acquisition costs are to be recognised at EUR 0. This applies in particular to airdrops and bounties received without any activity or in return for only minor activity; taxation is thereby deferred until the subsequent disposal.
The Federal Government may, by ordinance requiring the consent of the Bundesrat, lay down further rules on valuation and the order of disposal. For withholding purposes, the market price is generally decisive; details concerning the market price and the verification of transmitted acquisition data are likewise to be specified by ordinance.
The obligation for withholding tax will apply in particular to domestic crypto-asset service providers and operators, relevant trading platforms and crypto custodians, as well as domestic branches or permanent establishments of foreign providers. In exchange transactions, they may debit a shortfall or monetise investment income not received in cash from the customer’s account in order to remit the tax in euros. A corresponding obligation to issue a tax certificate will also be introduced.
If the acquisition costs and acquisition date are unknown to the withholding agent (the paying agent), it may generally rely on plausible information provided by the taxpayer. Otherwise, for withholding purposes, acquisition after December 31, 2026, is deemed to have occurred and the tax base is set at a flat rate of 50% of the disposal proceeds. This substitute tax base places a heavier burden on taxpayers than the 30% rule for other assets under Section 43a (2) sentence 7 EStG. Whether there is an objective justification for this unequal treatment must be clarified as the legislative process progresses.
Only withholding in the correct amount is intended to have a final discharge effect. Where the tax base is determined on a flat-rate basis, an assessment may therefore be required in order to take the actual gain or loss into account.
The Act is intended to enter into force as early as January 1, 2027. The new substantive rules will apply to exchange crypto-assets acquired after December 31, 2026, or received by the taxpayer after that date. They will also cover crypto-assets received from 2027 onwards through the lending or staking of holdings that themselves remain subject to the previous legal framework.
Sections 22 and 23 EStG will generally continue to apply to existing assets acquired by December 31, 2026. This provides grandfathering based on the acquisition date; however, existing and newly acquired assets must remain separately verifiable on a permanent basis. The restrictions applicable to the relevant category of income will apply to losses in each case.
Withholding tax will not apply until January 1, 2028, giving withholding agents a transitional period in which to adapt their systems. For the 2027 assessment period, it must therefore be clarified which certification and data requirements will apply to taxable income reportable under Section 20 EStG where no ongoing withholding has taken place.
Notice:
The short timetable leading up to the planned consideration by the Federal Cabinet leaves little room to resolve the outstanding practical issues. These include, in particular, the merely illustrative description of exchange crypto-assets, their distinction from tokens linked to real assets, the 50% substitute tax base and the likely practical difficulties involved in filing the tax return for 2027. Further technical requirements arise from the permanent coexistence of existing and newly acquired assets. In addition, the powers to issue ordinances defer key questions concerning market prices, documentation and the order of disposal to a subsequent non-parliamentary procedure.
Taxpayers should already maintain complete records of acquisition dates and costs, wallet transfers, transaction chains and types of receipt, and test how existing and newly acquired assets are represented in their crypto tax tools. Keeping the assets in separate custody can reduce documentation and allocation risks; transfers between a taxpayer’s own wallets should be recorded in a traceable manner. Identified losses relating to existing assets should be preserved, and the potential effects of different disposal scenarios should be examined. Purchases, sales or changes of residence motivated solely by tax considerations are generally not advisable; a change of residence always requires a comprehensive assessment of the individual circumstances.