The Germany crypto tax story just took its fourth and sharpest turn, and this time the proposal is hiding inside the budget bill. A Finance Ministry draft circulated September 9 reclassifies crypto from private sale transactions under § 23 EStG to flat capital income under § 20 EStG, the Abgeltungsteuer: 25% plus the 5.5% solidarity surcharge, an effective 26.375% flat rate excluding church tax. That is a meaningful change from the 25% draft we covered earlier this month, because the procedural placement is the news: standalone crypto tax bills died in the Bundestag, including a Green Party motion defeated in May, but a reclassification tucked into the budget bill is dramatically harder to strip out without unwinding the budget itself. This is Germany's fourth attempt in 18 months, and it is the first designed to survive.
The ministry's framing is blunt: crypto assets "increasingly represent a form of private capital investment and should not remain favoured relative to other income types." The revenue projections say the quiet part, about €160 million in 2028 rising to roughly €350 million annually by 2031, sums that are rounding errors in a federal budget, which tells you the goal is equalisation, not money.
Inside the Germany Crypto Tax Draft: Who Wins and Who Gets Trapped
The distributional cut is stranger than the headline suggests. Long-term holders lose everything: the 12-month holding period that made German crypto gains tax-free disappears for new purchases from January 1, 2027, with pre-2027 assets grandfathered under the old rule, though the draft's confirmation of that grandfathering is reportedly unconfirmed language. Short-term active traders get a windfall: their marginal rate drops from up to 45% personal income tax to 26.375%, an 18.625 percentage point cut, which means the bill deletes the distinction between holding and trading and, in doing so, subsidizes active trading over patient holding, an incentive structure most tax design tries to avoid. Staking and lending income moves into the capital income bucket, savers keep a €1,000 allowance, and crypto losses become offsettable against stock gains, a genuine improvement buried in the details.
Then the trap. From January 1, 2028, exchanges must withhold at source, and investors who cannot produce verified acquisition cost and date documentation face the flat 25% applied to the full sale proceeds, with zero deduction for original cost. For self-custody users who moved coins across wallets without exporting records, that is a tax on their entire balance, not their gain. The provision will push enormous record-keeping friction onto exactly the users the ministry cannot see, and it makes exchange custody, where the broker documents everything, structurally cheaper than self-custody, a policy choice wearing an administrative excuse.
Precedent and Probabilities
The Austrian precedent is cautionary for the ministry's arithmetic: Austria's 2022 flat-tax shift underperformed its revenue projections, and Germany is now following the same template while projecting bigger numbers. The draft still faces Bundestag debate, and budget bills get amended, but the placement means opponents must peel the crypto section out of a must-pass vehicle rather than defeat it on its own. If it passes as drafted, the two dates to calendar are January 1, 2027, when every new German crypto purchase starts accruing flat-tax liability, and January 1, 2028, when the withholding regime begins and the documentation trap arms itself.
Watch the Bundestag Finance Committee's first reading and whether the grandfathering language survives intact. The draft's own inconsistency on the pre-2027 rule is the amendment most likely to move, and the one that decides whether Germany's holders sell in December or keep holding through a tax break they no longer trust.
