Germany is reportedly considering a major change to its cryptocurrency tax framework, with a draft proposal introducing a flat 25% tax on crypto gains, rising to approximately 26.375% after the solidarity surcharge. The proposed rules are expected to take effect on January 1, 2027, but the legislation has not been finalized and remains subject to the legislative process.
The proposal could also change how investors are taxed when they cannot provide reliable records of their cryptocurrency acquisition dates and purchase costs. According to reports on the draft, sales involving undocumented holdings could face a default assessment in which 50% of the proceeds are used as the taxable basis. Circle executive Patrick Hansen has criticized this approach, warning that retail investors could face tax liabilities disproportionate to their actual profits, including cases where gains were small or losses were incurred.
The documentation issue is particularly significant for investors who have moved assets between exchanges, transferred tokens from self-custody wallets, or acquired holdings through platforms that no longer provide complete transaction histories. Without sufficient records, establishing the original acquisition cost and demonstrating eligibility for any transitional treatment could become more difficult.
The proposed flat tax would also reportedly remove the existing one-year holding-period exemption for crypto assets acquired from 2027 onward. Under the current framework, qualifying private crypto gains are generally tax-free when the assets have been held for more than one year. Reports indicate that holdings acquired before the proposed cutoff date would remain subject to the existing rules, although the ability to document acquisition dates would be important.
For the market, the proposal raises two distinct issues: the potential tax burden on future crypto gains and the practical challenge of proving acquisition costs. While the flat rate would provide a more standardized tax structure, the reported default assessment could create additional financial pressure for investors with incomplete records.
The next key developments are whether the draft advances through Germany’s legislative process and whether lawmakers revise the rules governing undocumented holdings. Until the proposal is finalized, the reported provisions should not be treated as enacted law.
