Most European jurisdictions tax crypto disposals as capital gains or as miscellaneous income at standard rates. Germany is the conspicuous outlier. Under section 23(1)1.2 of the German Einkommensteuergesetz (EStG), the income tax law, the disposal of a "private sale asset" is exempt from tax if the asset has been held for more than one year. Crypto qualifies as a private sale asset. The result is that a German tax resident who buys 1 BTC in March 2025 and sells it in April 2026 owes nothing on the eventual gain.
This article is for a German tax resident, or anyone considering becoming one for tax-planning reasons, looking to understand exactly how the one-year rule actually works. The summary that gets traded around social media ("crypto is tax-free in Germany after one year") is approximately correct but elides several details that matter in practice.
The exact text of the rule
Section 23(1)1.2 EStG defines a "private sale transaction" as the sale of an asset within one year of acquisition, where the asset is not real property. Section 23(3) sentence 5 sets out the exemption: gains from such transactions are not taxable if the period between acquisition and sale exceeds one year. The Federal Ministry of Finance (Bundesministerium der Finanzen, BMF) confirmed in its 2023 letter on virtual currencies and tokens that the section 23 framework applies to crypto.
An additional rule: gains from private sales below €1,000 per year are exempt regardless of holding period (the "Freigrenze"). For active traders, the Freigrenze rises to €1,000 starting from tax year 2024 (it was €600 previously).
What "more than one year" means precisely
The clock starts on the day of acquisition and runs to the day of disposal. "More than one year" means strictly more than 365 days (or 366 in a leap year), counted day by day. A coin acquired on 5 March 2025 and disposed of on 5 March 2026 has been held for exactly one year and is taxable. The same coin disposed of on 6 March 2026 has been held for one year and one day and is exempt.
The acquisition date for a coin received as a result of a chain split or airdrop is the date of receipt, not the date of the original holding that gave rise to the receipt. A staking reward received in May 2025 starts its own one-year clock from May 2025; the underlying ETH that produced the reward is on a separate clock.
Cost basis: FIFO is the default
Germany applies FIFO to crypto holdings by default, per the BMF letter. The first units acquired are the first units deemed sold, which has implications for the holding period: if you bought 1 BTC in January 2024 and another 1 BTC in November 2025, and then sold 1 BTC in February 2026, the BTC sold is the January 2024 lot, which has been held for over two years and is exempt. The November 2025 lot is still in the pool, with its one-year clock continuing.
The taxpayer can elect specific identification on a per-wallet basis if the records support it, but the documentation burden is similar to the US position: each disposal needs to identify the specific lot disposed of, with acquisition date, cost basis and sale date.
The complication: the 10-year staking rule was repealed
Until 2022, German tax law contained a quirk that made staked crypto a worse tax position than non-staked crypto. The argument was that staking constituted a "use" of the asset to generate income, which under the original section 23(1)1.2 wording extended the holding period for tax-free disposal from one year to ten years.
This was unpopular and arguably unintended. The BMF resolved the question in its 2023 letter referenced above: staking does not extend the one-year holding period. A staked ETH position held for 13 months and sold qualifies for the exemption, even though it was actively earning rewards during that time. The rewards themselves are taxed as miscellaneous income at receipt under section 22 No 3 EStG, separately from the eventual capital treatment of the underlying.
This change was retroactive in effect: returns filed before 2023 that took the conservative ten-year position can be amended (within the general statute of limitations) to apply the one-year position.
What this means for a UK or US investor considering relocation
The one-year exemption is a meaningful planning consideration, but the practical headlines are easily overstated:
Tax residency, not citizenship, is what matters. A US citizen who moves to Germany still files a US return on worldwide income. The German exemption does not apply on the US side; the US-Germany tax treaty does not contain a saving clause that overrides US domestic taxation of capital gains. For a US citizen, the German exemption simply means no German tax in addition to the US tax. The US tax remains.
For a UK or other non-US national, relocation is the cleaner case. Becoming a German tax resident (typically by establishing a habitual abode there for more than 183 days in a calendar year, per section 8 AO) shifts primary tax residency. The UK exit-tax rules (recently tightened in HMRC’s temporary non-residence pages) will catch a UK national who leaves and returns within five years, but a clean five-year-plus relocation realises gains in the German system.
Acquired residency does not back-date the holding period. The clock under section 23 is from the date of acquisition. A coin bought five years before becoming German tax resident has a five-year holding period for German purposes, so disposal triggers no German tax on the gain. The original UK or US tax position on the gain is a separate matter governed by exit-tax and pre-residency rules in the source country.
Filing in Germany
Crypto disposals are reported on the Anlage SO of the German income tax return, in the section for "private sale transactions". Disposals within the one-year period are taxable at the taxpayer’s marginal income tax rate (up to 45 percent plus the 5.5 percent solidarity surcharge for high earners); disposals after one year are exempt and need only be reported as informational.
The Anlage SO requires per-disposal detail: acquisition date, sale date, proceeds, cost basis, gain or loss. Our Crypto Tax Calculator ships with a German jurisdiction mode that produces the calculation in the correct format and flags exempt vs taxable disposals based on the one-year clock per lot. The free preview will tell you the totals before you commit to the full report.