Bitcoin and Tax: The Planned End of the Holding Period from 2027

The current law: the one-year holding period

Bitcoin and other crypto assets are treated for tax purposes as "other assets". Where they are held as private assets, the taxation of a capital gain follows the rules on private disposal transactions (sec. 23 (1) sent. 1 no. 2 EStG). The holding period is decisive:

• Sale within one year of acquisition: the gain is taxable at the personal income-tax rate (plus solidarity surcharge and, where applicable, church tax). An exemption limit of EUR 1,000 per year applies (sec. 23 (3) sent. 5 EStG in the version applicable from 2024); once exceeded, the entire gain is taxable.
• Sale after more than one year: the gain is – regardless of its amount – entirely free of income tax.

The Federal Fiscal Court expressly confirmed this scheme in its landmark judgment of 14 Feb 2023 (IX R 3/22): crypto assets are assets, their disposal within the one-year period is a taxable private disposal, and there is no enforcement deficit preventing taxation. Swapping one cryptocurrency for another also counts as acquisition and disposal – a conversion into euros ("cashing out") is not required for taxability (confirmed among others by the Nuremberg Tax Court, judgment of 22 Jan 2025 – 3 K 760/22).

The reform plan: what the government intends from 2027

As part of its 2027 budget and tax planning, the German government has announced a fundamental change to the taxation of privately held crypto assets. The core of the project (considered by the cabinet in summer 2026):

• End of the holding period: the one-year period after which gains are currently tax-free is to be abolished. A capital gain would then be taxable regardless of the holding period – whether the coins were held for one month, three years or ten years would make no difference.
• New income category: privately held crypto assets are to be allocated to income from capital assets and thus taxed like classic capital investments (such as shares). Under discussion is the flat-rate withholding tax of 25 percent plus solidarity surcharge (around 26.4 percent), instead of the personal rate.
• Planned entry into force: 1 January 2027.

A simple example for context: a gain of EUR 10,000 from long-held Bitcoin is tax-free under current law. Under the reform plans, tax of roughly EUR 2,600 would arise – depending on the final design.

State of the legislation and open questions – an honest assessment

It is important to view the project soberly: it is a legislative project that still has to pass through the parliamentary process. The timetable envisages parliamentary deliberations in autumn 2026 and consideration by the Bundesrat at year-end; the aim is entry into force on 1 January 2027. Until promulgation in the Federal Law Gazette, however, the current law with its one-year holding period continues to apply.

Several key points have not been conclusively settled and should form the basis of any decision:

• Grandfathering of existing holdings: whether and to what extent crypto assets acquired before a cut-off date continue to benefit from the exemption is open. Transitional rules are being discussed – nothing reliable exists yet.
• Loss offsetting: how losses may be offset in future (against share gains, or only within capital income) has not been determined.
• Constitutional questions: any retroactive effect on existing holdings would be constitutionally sensitive; the project faces political criticism.

That such grandfathering is being concretely discussed is shown by the parliamentary process: bills already tabled by the opposition – such as the draft of the Bündnis 90/Die Grünen parliamentary group (Bundestag document 21/5752 of May 2026) – provide for applying the new rules only to crypto assets acquired after 31 December 2025, thus sparing existing holdings. Whether such a cut-off date appears in the government bill and the eventual law is open; such opposition drafts are not applicable law and do not bind the governing majority.

For practice this means: acting hastily merely because of the announcement is not advisable. It makes sense to review your own wealth and succession planning early with tax advice, and to structure the legal arrangements so that they hold up under either scenario.

Already applicable law: the reporting duties under the KStTG

Regardless of the holding period, the environment has already changed: with the Crypto-Asset Tax Transparency Act (KStTG), implementing the European DAC8 directive and in force since 1 January 2026, providers of crypto-asset services (exchanges, custodians) are required to collect and report transaction and personal data of their users to the tax authorities. The first transmission is scheduled for 2027 (for data from 2026 onwards).

The practical consequence: the days when crypto gains effectively remained hidden are ending. The tax office will receive structured data and can match it against tax returns. Anyone unable to prove acquisition dates and costs risks an unfavourable estimate. Thorough, robust documentation of the origin, timing and value of holdings therefore becomes all the more important.

The notarial connection: where structuring comes in

The tax assessment is a matter for the tax adviser. The underlying legal transactions, however – gifts, transfers, succession and corporate arrangements – are frequently structured notarially. At several points tax developments and notarial structuring interlock:

1. Wealth transfer across generations

Lifetime transfers of crypto assets to the next generation remain a central succession-planning instrument regardless of the holding-period reform – not least because of the gift-tax allowances of sec. 16 ErbStG, renewed every ten years. Important for the income-tax context: on a gratuitous transfer, the recipient steps into the donor's acquisition data (sec. 23 (1) sent. 3 EStG). How this carry-over works under the new regime is part of the tax review – the clear documentation of acquisition date and cost in the notarial deed is valuable in any scenario. See: Gifting Bitcoin.

2. Evidentiary documentation of acquisition and origin

If practically every disposal becomes taxable in future while the tax authorities simultaneously receive provider data (KStTG), the question "what was acquired, when and at what value?" gains enormous importance. Notarial deeds – such as gift or transfer agreements – record timing, subject matter and value with lasting evidentiary force. This later eases proof of acquisition costs and prevents unfavourable estimates.

3. Estate planning and valuation dates

For the inheritance case, inheritance tax remains decisive (valuation as of the date of death, sec. 11 BewG) – it is not directly affected by the income-tax holding-period reform. Nonetheless, future income taxation influences when heirs sell holdings and how liquidity for tax payments is provided. Wills, legacies and executorship can be aligned accordingly. See: Passing on crypto assets and Inheritance and gift tax on crypto assets.

4. Holding in business rather than private assets

Crypto assets held as business assets – for instance in a GmbH – are subject to a different tax regime than private assets in any case; the holding period of sec. 23 EStG plays no role there. Whether holding via a corporation is advantageous in an individual case is a tax and business question – the corporate implementation (formation, contribution in kind, articles) is carried out notarially. See: Company formation in the blockchain sector.

What you can sensibly do now

The reform has not yet been enacted – but the closer a possible cut-off date comes, the tighter the room for transfers planned at leisure becomes. Anyone already considering a gift, a restructuring or a succession arrangement should not leave it until the last moment: arrangements set up with care today are less likely to come under time pressure. This does not mean acting hastily – it means planning early and with foresight while the current law still applies.

• Document your holdings: secure acquisition dates, costs and transaction history – the basis of any future tax return and structuring.
• Obtain tax advice: whether bringing forward sales or transfers makes sense depends on your individual situation and should be clarified with a tax adviser.
• Review succession and wealth planning: set up gift and succession arrangements so they hold up regardless of the outcome of the legislative process – I will be glad to advise and notarise this.
• Watch developments: until the law is promulgated, current law applies. I keep this article up to date.