[DigitalToday reporter Choi Jae-won] The German government is pushing a plan to scrap the current system under which gains from selling cryptocurrencies such as bitcoin are not taxed if the assets are held for more than 1 year. That raises the likelihood that Germany will lose a prominent crypto tax break that has favored long-term investors.

On Sept. 9 (local time), Cointelegraph reported that Germany's Federal Ministry of Finance has prepared a draft law to impose a flat 25 percent tax on gains from the sale of crypto assets regardless of how long they are held. Documents confirmed by local outlets Welt and Handelsblatt show the new system is set to apply to crypto assets such as bitcoin and ethereum acquired after Jan. 1, 2027.

In Germany, profits are generally tax-free if an individual sells cryptocurrency more than 1 year after acquisition. If sold within 1 year, the gains are taxed at the personal income tax rate. Under the new system, cryptocurrencies would fall under a flat 25 percent tax like other capital income such as stocks, ending the 1-year tax exemption.

The ministry plans transitional measures for existing investors. Crypto assets acquired by Dec. 31 this year would remain under the current tax system, preserving the tax exemption if held for more than 1 year. The document also includes a plan to begin automatic withholding by exchanges and crypto service providers from January 2028, taking into account the time needed to build the system.

The ministry expects the overhaul to secure about 160 million euros (24.92 billion won) in additional tax revenue in 2028. The tax effect is expected to expand to about 350 million euros (54.52 billion won) a year thereafter. Finance Minister Lars Klingbeil (Lars Klingbeil) reaffirmed in July his willingness to overhaul the system, saying crypto income should be taxed similarly to other investment income.

The document is still in the early stages of coordination within the government. Changes remain possible to the tax rate and the timing as it goes through cabinet approval and the legislative process in the Bundestag.