Taxation of Crypto Assets in Germany

Taxation of crypto assets in Germany: the short answer

The taxation of crypto assets in Germany depends on who holds them and how. For private individuals, cryptocurrencies such as bitcoin and ether are “other assets”, and gains from selling or exchanging them are taxable as private disposal transactions only if the period between acquisition and disposal does not exceed one year (§ 23(1) sentence 1 no. 2 of the Income Tax Act, EStG). Gains are tax-free if the total gain from all private disposal transactions in a calendar year is less than EUR 1,000. Income from staking, lending and similar activities is generally taxable as other income when received.

For businesses, crypto assets are business assets, and all gains and income are taxable regardless of holding periods. The Federal Fiscal Court confirmed in its judgment of 14 February 2023 – IX R 3/22, as summarised by the tax administration of North Rhine-Westphalia, that gains from disposing of cryptocurrencies are taxable as private disposal transactions.

The Federal Ministry of Finance has published detailed administrative guidance on the income tax treatment of virtual currencies and other tokens, most recently in a letter dated 6 March 2025 on individual questions concerning crypto assets, as referenced by the tax administration of North Rhine-Westphalia. In addition, crypto service providers must report transactions to the tax authorities from 2026 under the EU's DAC8 rules, which makes accurate reporting by investors more important than ever.

Private investors: the one-year rule

For private investors, the key rule is the one-year holding period. A disposal within one year of acquisition, whether a sale for euros, an exchange into another cryptocurrency or a payment for goods and services, is a taxable private disposal transaction. The gain is the difference between the proceeds or the fair market value of what is received and the acquisition costs, minus transaction costs. Gains are taxed at the individual's personal income tax rate, which can reach 45% plus solidarity surcharge, not at the flat 25% rate for capital income. Losses from such transactions can be offset only against gains from private disposal transactions.

After more than one year, a disposal is tax-free. Investors who hold their coins for more than twelve months before selling or exchanging them therefore pay no income tax on the gain. Each unit has its own holding period, and where units were acquired at different times and are held in the same wallet, the order of disposal must be determined; the administration generally accepts the first-in, first-out method for this purpose, applied per wallet or account.

Staking, lending and other income

Rewards from staking, lending and similar activities are generally taxable as other income under § 22 no. 3 EStG at the time they are received, valued at their market value. Such income is not taxable if the total of these other services income is less than EUR 256 in a calendar year. The coins received as rewards are then acquired at that value, and a new one-year holding period starts for them.

A significant question was whether the use of coins for staking or lending extends the holding period for the underlying coins from one year to ten years under § 23(1) sentence 1 no. 2 sentence 4 EStG, which applies to assets used as a source of income. The Federal Ministry of Finance has taken the view in its guidance that this extension does not apply to the use of virtual currencies for staking or lending, so that the one-year period continues to apply to the underlying coins. Investors should nonetheless monitor developments, keep a copy of the applicable guidance and document their holdings and activities carefully.

Airdrops, hard forks and rewards from liquidity mining raise further questions. Coins received in an airdrop without consideration are generally not taxable on receipt, but the treatment depends on whether the recipient provided any service in return. Coins received in a hard fork are generally treated as acquired at the same time as the original coins. DeFi transactions, such as providing liquidity to pools, can involve exchanges and therefore taxable disposals.

Crypto assets held by companies

For companies, the taxation of crypto assets follows the general rules for business income. A GmbH holding bitcoin as an investment or receiving it as payment includes all gains and losses in its taxable profit, regardless of the holding period, and pays corporate income tax and trade tax. Crypto assets held long-term are generally fixed assets, while those held for trading are current assets; they are valued at acquisition cost, with write-downs where a permanent impairment occurs and the lower-of-cost-or-market principle applies.

Token sales by companies, for example in a token offering, generate taxable income depending on the rights attached to the tokens, and utility or security tokens may be treated as advance payments, revenue or financing.

For VAT, the exchange of traditional currency for bitcoin and similar payment tokens is exempt as a financial transaction, following the case law of the Court of Justice of the European Union, but other services in the crypto sector, such as advisory services, can be taxable. Businesses that accept crypto as payment must determine the value of the consideration at the time of the supply and record it in their accounts, together with any later gain or loss when the coins are converted into euros.

Regulatory requirements apply in parallel. Since the EU Markets in Crypto-Assets Regulation (MiCAR) became applicable, crypto-asset service providers need authorisation, and offerings of certain tokens require white papers. Our page on fintech and crypto covers the regulatory framework.

Reporting, DAC8 and audits

Investors must report private disposal transactions and other income in their annual income tax return, using the relevant annex. The tax authorities increasingly receive data from service providers: under the EU's DAC8 directive, implemented in Germany, crypto-asset service providers must report transactions of their customers to the tax authorities, with reporting starting for 2026. Data obtained through such reporting, as well as information from foreign authorities and investigations, enables the tax authorities to identify unreported gains.

Investors who have not declared taxable crypto gains in the past should consider their options promptly. Where errors were not intentional, a correction under § 153 of the Fiscal Code may be required; where taxes were evaded, a voluntary disclosure may be the only route to exemption from punishment, provided no blocking ground has arisen. See our article on voluntary disclosure under § 371 AO. For investors leaving Germany with significant holdings, the rules on exit taxation for shares do not apply to cryptocurrencies held privately, but other exit rules may apply to business holdings.

Special cases in the taxation of crypto assets

NFTs and other tokens

Non-fungible tokens and other tokens are not all treated alike. Tokens that grant rights similar to shares or bonds can produce capital income taxed at the flat rate, while utility tokens and NFTs held privately are generally other assets subject to the one-year rule for private disposal transactions. The legal and economic content of each token determines its treatment, so investors and issuers should analyse the token terms rather than relying on labels.

Inheritance and gifts

Crypto assets form part of the estate on death and are subject to inheritance tax at their market value on the date of death, like other assets. Gifts of crypto assets are subject to gift tax. Heirs continue the testator's holding period for income tax purposes, so a sale shortly after an inheritance can still be tax-free if the testator held the coins for more than a year. Access to wallets and private keys should be addressed in estate planning, because without them the assets may be lost even though they remain taxable in principle. See our article on wills and inheritance contracts.

Trading as a business

Very active trading does not in itself make private crypto investments a commercial business, but large-scale mining, operating trading algorithms for third parties or offering services to others can. Where the taxation of crypto assets shifts from private to commercial, holding periods no longer matter and trade tax may apply. Investors with extensive activities should check their position before the tax office raises the question in an audit.

Planning points

• Track holding periods per wallet and consider the one-year period before selling or exchanging.
• Use the EUR 1,000 exemption limit for private disposal gains and the EUR 256 limit for other income where possible, noting that they are exemption limits, not allowances: if exceeded, the whole amount is taxable.
• Decide carefully whether crypto investments should be held privately or through a company, considering the tax-free disposal after one year for individuals against the corporate taxation of all gains.
• Document staking, lending and DeFi activities and their tax treatment.
• Prepare for DAC8 reporting by reconciling platform data with your own records.

Illustration: an investor buys 2 bitcoin in March 2025 for EUR 120,000 and exchanges one for ether in January 2026 when it is worth EUR 90,000. The exchange is a taxable disposal within one year, producing a gain of EUR 30,000 taxed at her personal income tax rate. If she sells the second bitcoin in April 2026, more than one year after acquisition, any gain is tax-free. Staking rewards received on the ether are taxable as other income when received.

How TRW & Co helps with the taxation of crypto assets

We advise private investors, family offices and companies on the taxation of crypto assets: structuring holdings, assessing staking, lending and DeFi activities, tax treatment of token offerings and crypto payments, and the interaction with MiCAR regulation. Where past returns were incomplete, we advise on corrections and voluntary disclosures and represent clients in tax audits, finance court proceedings and criminal tax investigations. Our tax and private clients team can be reached via our contact page. This article provides general information and is not tax or legal advice.