Germany has prepared legislation to tax cryptocurrency gains at 25% plus a 5.5% solidarity surcharge, creating an effective 26.375% rate before church tax from 2027, ending the current exemption for Bitcoin and other digital assets held for more than one year. According to Handelsblatt, the Federal Ministry of Finance circulated a draft bill on September 9 that would bring crypto gains under the country's capital income tax, applying the same 25% rate currently applied to gains from stocks and other securities. The proposed rules would apply to crypto assets acquired after December 31, 2026, while the tax itself would take effect in 2027. The Finance Ministry expects the measure to generate roughly €350 million in additional tax revenue by 2031, with a personal allowance of €1,000 expected to remain available. A solidarity surcharge also applies, so that the first €1,000 of yearly gains stays free, and losses could finally be written off against other gains.
The Alternative for Germany (AfD) secured 43.8% of the vote in Saxony-Anhalt's state election, winning 39 of 83 parliamentary seats while opposing plans to remove Germany's one-year crypto tax exemption. According to Reuters, the AfD received 43.8% of party-list votes and 44.3% of first votes across 2,661 polling districts, while Chancellor Friedrich Merz's Christian Democratic Union fell to 17.2% of party-list votes, nearly 20 percentage points below its 2021 election result. The victory gives the AfD another political platform as Germany's federal government prepares crypto tax legislation for 2027, with the party positioning itself as Germany's most crypto-friendly major party. Former CDU Minister Peter Altmaier told CNBC that "Saxony-Anhalt is one of the smallest states, of course, and the German democracy is strong and resilient. But this is unprecedented, and it will be a matter of concern not only for us but also for our neighbors in Europe."
The AfD's electoral success was largely driven by Ulrich Siegmund, a 35-year-old charismatic candidate who gave the far-right party a more approachable image. As reported by Associated Press, Siegmund's campaign motto was "everything is possible" and he combined promises of a better future with nostalgia for the past. Born on October 25, 1990, weeks after German reunification, Siegmund has built a social media following as a critic of COVID-19 restrictions and served as a lawmaker in Magdeburg's state legislature for 10 years. Despite his party's pro-Russian and anti-immigration positions, Siegmund has avoided making extreme statements, presenting himself as a man of the people while insisting after the election that the party won't "throw our positions overboard for coalitions." Political science professor Wolfgang Merkel noted that Siegmund "manages to come over as likable, open, always smiling" and avoids the provocative language of other prominent AfD figures, though he remains uncompromising in his political stances.
Under the current system, privately held cryptocurrencies do not fall under Germany's flat capital income tax. Bitcoin, Ether and other crypto assets are instead treated as private assets, with gains potentially subject to an investor's personal income tax rate when sold within 12 months of purchase. Individual income tax rates can reach 45%, but crypto assets sold after more than one year are generally exempt from tax. The proposed 25% rate would remove that holding-period benefit for assets covered by the new system, while simultaneously reducing the potential tax rate for some shorter-term investors who currently face their personal income tax rate. Moving crypto under the Abgeltungsteuer could create another change for taxpayers, as gains from digital assets could be offset against losses from stocks and other securities under the planned system. The ministry argues that the exemption rewards speculation, stating "It is unfair that hard-earned income and capital gains are taxed, while profits from speculation with crypto assets remain largely tax-free."
The tax debate unfolds in one of Europe's largest cryptocurrency markets, with Chainalysis estimating Germany generated $24.1 billion in potentially taxable on-chain crypto activity during 2025. According to Chainalysis, this consisted of $15.6 billion in payments, $6.1 billion in realized gains, and $2.4 billion in income. The figure represents activity that could potentially fall within commonly used tax rules, not actual tax owed. Germany also recorded $219.4 billion flowing into the country between July 2024 and June 2025, representing a 54% increase from the previous comparable period. The new tax rules would target crypto assets bought after December 31, 2026, while the treatment of previously purchased holdings has yet to be decided. The ministry expects to generate €160 million in 2028, reaching €350 million by 2031 from the new crypto tax regime.
Despite the AfD's political victory, Germany's federal tax treatment of cryptocurrency cannot be changed by state governments. As reported by crypto.news, any removal or modification of the one-year holding rule would require federal legislative approval after the Finance Ministry releases its proposal. Finance Minister Lars Klingbeil said in July that his ministry was working on the proposal and expected a concrete bill, though he declined to disclose provisions before completing the government's internal coordination process. The proposal follows an unsuccessful attempt in parliament to remove the same long-term holding exemption earlier this year, when Germany's Finance Committee rejected a Green Party proposal in May. The crypto tax draft must now be reviewed by other federal ministries before it can advance to the cabinet and then through Germany's parliamentary process. BeInCrypto noted in July that exchanges would only withhold the money automatically from 2028, in step with wider crypto tax reporting rules. The draft represents the fourth attempt in roughly eighteen months to scrap the one-year rule, with this being the first to be included in the federal budget bill rather than standing alone, making it considerably harder to strip out.
