The issue of taxing cryptocurrencies in Germany is intensifying as Alliance90/The Greens, the Green parliamentary group in the German Bundestag, aims to eliminate a tax exemption that benefits cryptocurrency investments.
Currently, cryptocurrency taxes in Germany are determined based on the duration of an investor’s holdings. After holding crypto for one year, private investors can realize tax-free trading profits. This one-year period was designed to encourage long-term investments and enhance Germany’s appeal as a destination for crypto investors. The goal is to support long-term-oriented investors while discouraging speculative short-term transactions.
However, the Greens argue that this unique exemption period is unfair, as other financial instruments are subject to a flat 25% capital gains tax, regardless of the duration of the investment. This proposal has sparked discussions about the potential impact on investment culture, tax fairness, and the administration of crypto transactions.
Sabine Grützmacher, a member of the Bundestag for the Greens, supports the proposal and argues for equal conditions for different investment options. Grützmacher states, “We are committed to equal conditions for different investment options. The capital gains tax on stock profits has existed since 2009 without a tax-free minimum holding period.” The Greens classify crypto tokens as capital investments, more comparable to stocks or gold than currency. However, due to the high volatility of crypto tokens, Grützmacher believes that significant consumer protections are necessary before recommending them for investment.
Grützmacher emphasizes that the proposal is still under consideration and any implementation would include a cut-off date. Cryptocurrencies purchased before this date would still be eligible for tax-free selling, even after the new law takes effect.
Not everyone agrees with the Greens’ argument that crypto should not be exempted from taxes. Ulli Spankowski, founder of the crypto trading app Bison and chief digital officer at Boerse Stuttgart Digital, believes that the classification of crypto assets in the German tax code is clear. Under current law, crypto assets are considered “other economic goods” and are eligible for tax-free trading after one year, similar to physical gold. Spankowski believes this is a positive aspect that attracts investors to Germany.
Frank Schäffler, a member of the Bundestag for the Free Democratic Party (FDP), agrees that abolishing the holding period would hinder investment culture in Germany. He states, “The Greens’ demand would further complicate our tax system. The abolition of the speculation period would mean that crypto profits would always be taxed, even if the crypto assets are held as investment objects for a long time.” Schäffler suggests that capital formation should be simplified, and long-term investments should be rewarded by increasing the tax exemption limit.
The proposal put forth by the Greens faces challenges in passing since Germany’s governing coalition, consisting of the Social Democratic Party (SPD), the Greens, and the FDP, has experienced growing disagreements. The FDP and SPD’s approval is necessary for the proposal to become law, and it is unlikely that the necessary votes will be obtained.
Regardless of the political outcome, the impact of abolishing the tax exemption on German markets and investing may be minimal. While the popularity of cryptocurrencies among German investors is growing, overall investment rates in Germany are relatively low compared to other European countries. Ulli Spankowski argues that instead of abolishing the holding period, the government should focus on creating incentives for investors through tax breaks and education initiatives to promote a more active investment culture.
In conclusion, the debate surrounding cryptocurrency taxation in Germany continues to unfold, with the Greens pushing for the elimination of a tax exemption and others advocating for simplification and rewards for long-term investments. The outcome of this debate will have implications for investment culture and the administration of crypto transactions in Germany.