The debate surrounding the taxation of cryptocurrencies in Germany is intensifying as the Green parliamentary group, Alliance90/The Greens, seeks to eliminate a tax exemption that benefits cryptocurrency investments. Currently, cryptocurrency taxes in Germany are determined by the length of time an investor has held their crypto. After one year of holding crypto, private investors can realize tax-free trading profits. This one-year period was implemented to encourage long-term investments and enhance Germany’s appeal as a destination for crypto investors. The Greens argue that this unique exemption period is unfair since other financial instruments are subject to a flat 25% capital gains tax, regardless of the duration of 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, defends the proposal and advocates for equal conditions for different investment options. Grützmacher highlights that the capital gains tax on stock profits has been in place since 2009 without a tax-free minimum holding period. The Greens categorize crypto tokens as capital investments, similar to stocks or gold, rather than currency. However, due to the high volatility of crypto tokens’ value, the party cannot recommend them for investment without significant consumer protections.
Grützmacher stresses that the Green’s proposal is still under consideration but clarifies that any proposal would include a cut-off date. Cryptocurrencies purchased before a certain date would still be eligible for tax-free sales, even after the new law is implemented.
Not everyone agrees with the Greens’ argument that crypto does not deserve an exemption. 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, the same as physical gold.
Spankowski further argues that the one-year holding period serves as an important tool to expand the investor base and has made Germany an attractive location for crypto investors. 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. Schäffler suggests that capital formation should be simplified, and long-term investments should be rewarded by increasing the tax exemption limit.
The Greens’ proposal faces challenges in passing since the FDP and SPD’s approval is necessary. The governing coalition in Germany, which consists of the SPD, the Greens, and the FDP, is experiencing a growing divide, particularly between the Greens and the FDP, making it difficult to find common ground on various policy issues.
The potential abolition of the tax exemption may not significantly impact German markets and investing. While the popularity of cryptocurrencies among German investors is growing, the overall investment rate in Germany remains relatively low compared to other European countries. Promoting a more active investment culture requires not only changes in the law but also incentives through tax breaks and educational initiatives.
In conclusion, the debate over taxing cryptocurrencies in Germany is ongoing, with the Greens aiming to eliminate a tax exemption favoring crypto investments. The proposal has sparked discussions about investment culture, tax fairness, and the administration of crypto transactions. However, not everyone agrees with the Greens’ stance, and the proposal faces challenges in passing. The potential impact on German markets and investing may be limited, and promoting a more active investment culture requires a comprehensive approach involving various stakeholders.