Germany is considering a significant change to how it taxes cryptocurrencies like Bitcoin BTC/USD and Ethereum BTC/USD, potentially ending the long-standing rule that exempts digital assets from capital gains tax after a one-year holding period.

What Happened: The proposal, part of the final draft from the “Budget, Taxes, Finance” working group in the ongoing coalition negotiations, suggests taxing cryptocurrency profits as private capital income at a flat rate of 30%, similar to traditional stock investments.

The change would mark a fundamental shift in Germany's approach to digital asset taxation, bringing it in line with equity markets.

Currently, German investors who hold cryptocurrencies for more than one year are not subject to tax on any gains—a policy that has made the country a relatively favorable jurisdiction for long-term crypto holders.

According to documents obtained by BTC-ECHO, the Social Democratic Party (SPD) is behind the push to harmonize the tax treatment of crypto and traditional assets.

However, the SPD's electoral platform did not explicitly mention changes to crypto taxation, and the party has yet to respond to media inquiries regarding the proposal.

Despite the SPD's support, the plan faces internal resistance.

Lawmakers from the CDU/CSU alliance have expressed skepticism about the proposal's likelihood of becoming law.

Party insiders told BTC-ECHO that both the elimination of the one-year exemption and the capital gains tax hike are considered low-priority items compared to other unresolved negotiation points.

The coalition's working groups concluded their initial discussions on Monday.

Their recommendations will now be reviewed by party leadership during an editorial phase, ahead of a final round of negotiations involving senior leaders from all involved parties.

Also Read: Bitcoin Is ‘Fulfilling Its Destiny’ As World Reserve Currency, Says Bitcoin Whale Trace Mayer

Why It Matters: If the proposal to abolish the one-year holding exemption gains traction, it could result in Germany adopting a model similar to Austria's, which introduced a flat tax on crypto in 2022 and did away with its one-year rule.

While this shift streamlined investor documentation and allowed exchanges to handle tax deductions automatically, it also created mixed reactions among consumers due to the increased taxation burden.

The outcome of the negotiations will determine whether Germany follows Austria's lead or maintains its more lenient crypto tax policy.

The deliberation follows Germany selling its stash of 50,000 BTC in 2024, a move that drew derision from crypto investors.

For now, the future of crypto taxation in Germany remains uncertain, with political divisions likely to influence the final decision.

Read Next:

• SEC Crypto Task Force Schedules Four More Roundtables On Regulation