German Finance Ministry proposes ending crypto tax-free holding period

Investors purchasing Bitcoin in Germany face a critical tax deadline under a proposed finance ministry bill that would eliminate the one-year tax-free holding period for new acquisitions after December 31, 2026. The German federal cabinet is scheduled to consider the legislative package on October 14, 2026, forcing a careful examination of whether to use lump-sum purchases, fixed monthly savings plans, or exchange-traded notes.

German Tax Reform Targets Crypto Holding Periods

Under current German tax law governed by Article 23 of the Income Tax Act, private investors who hold Bitcoin for more than one year can sell their holdings entirely tax-free regardless of the capital gain amount. Sellers who liquidate their holdings within one year must pay their personal income tax rate on the profit, provided their total private sales gains reach the 1,000-euro threshold within the calendar year. According to the portal Bitcoin Blocktrainer, the new legislative proposal would terminate this exemption for crypto assets acquired after December 31, 2026.

Assets purchased after that date would instead fall under a flat-rate withholding tax regardless of the holding duration. For assets already held in portfolios before the deadline, the draft law includes a grandfathering provision that preserves the one-year exemption rule. This distinction creates a significant divergence for investors depending on which acquisition method they select before the end of 2026.

Three Pathways Open for Bitcoin Exposure

German investors currently utilize three primary avenues to gain exposure to Bitcoin price movements, each carrying distinct legal and fiscal treatments. Direct purchase involves acquiring actual Bitcoin and storing the assets either on a trading platform or within a personal crypto wallet managed via cryptographic keys on a blockchain. A lump-sum purchase executed in October or November falls entirely under the old legal framework, preserving the tax-free status after a one-year hold.

Bitcoin savings plans operate as standing orders for direct purchases where a provider acquires a fixed euro amount at regular intervals regardless of the market price. This dollar-cost averaging strategy purchases more Bitcoin when prices drop and fewer when prices rise, placing the average acquisition cost below the mean market price. However, a savings plan starting in October 2026 and running for two years crosses the legislative dividing line, creating two distinct tax categories within the same savings plan where 2026 installments remain protected while 2027 installments do not.

The third pathway involves exchange-traded products, as the European Union lacks UCITS-compliant Bitcoin funds due to restrictions against placing all fund assets into a single value. Germany instead offers exchange-traded notes or exchange-traded products, which function as debt securities quoted on exchanges and backed by Bitcoin.

Cabinet Reviews Cryptocurrency Tax Adjustments on October 14

The federal cabinet must review the draft text on October 14, 2026, to determine the legislative timeline for the cryptocurrency tax adjustments. Market participants must weigh these upcoming regulatory shifts against ongoing price volatility and individual financial strategies.

Whether the cabinet will amend the grandfathering provisions or alter the implementation date ahead of the final parliamentary vote remains undetermined as lawmakers prepare to debate the measure.