Germany offers something most major jurisdictions do not: a genuine path to a zero-rate disposal. Under section 23 of the Einkommensteuergesetz (§23 EStG), private crypto held for longer than twelve months is tax-free when sold. Sell the same asset inside twelve months and the gain is taxed at the holder's individual marginal income-tax rate. There is no reduced long-term rate as a middle ground — the one-year line is a cliff between full taxation and no taxation at all, which makes the holding period the single most important fact about any German crypto position.
The §23 one-year rule
The rule treats crypto as a private asset whose disposal is a private sale transaction. The outcome turns entirely on how long the specific units were held:
- Held more than twelve months — the disposal is tax-free, regardless of how large the gain is.
- Held twelve months or less — the gain is taxed as other income at the holder's marginal rate, which scales with total income.
Because the boundary is so consequential, the holder's question is never just "what did this cost?" but "when exactly was this unit acquired, and has it crossed the line?" A disposal that could be deferred a few weeks to clear twelve months can move from fully taxed to fully exempt.
The €600 freigrenze — an all-or-nothing threshold
Germany applies an annual exemption of €600 to private sale gains, but its mechanics catch people out. It is a freigrenze, not an allowance. The distinction matters:
- An allowance exempts the first slice and taxes the rest. A freigrenze does not.
- With a freigrenze, if total private-sale gains for the year stay at or below €600, the whole amount is tax-free. Exceed it by any margin and the entire gain becomes taxable — not just the portion above €600.
So a holder with €590 of short-term gains pays nothing, while a holder with €610 pays tax on the full €610. The threshold rewards staying under the line and penalises drifting just over it, which makes knowing the running total before year end a real planning concern.
FIFO and the twelve-month clock
Germany applies FIFO for crypto under BMF guidance — the oldest units are treated as disposed of first. FIFO and the one-year rule interact directly, and that interaction is the whole reason lot-level records are essential.
Because the oldest lots are sold first, FIFO tends to dispose of the units most likely to have already crossed the twelve-month line — which often works in the holder's favour, since those are the units that may qualify for the tax-free treatment. But the only way to know whether a given disposal is tax-free is to track the acquisition date of each lot and test it against the one-year clock at the moment of sale. A balance-level average cannot answer that question; only per-lot holding periods can. HQ Wealth uses FIFO and tracks the twelve-month clock per lot, so the tax-free threshold is applied to exactly the units that have earned it.
As elsewhere, a crypto-to-crypto swap is a taxable disposal of the asset given up — and it also resets the clock, because the asset received is newly acquired on the swap date and starts its own twelve months from zero.
A note on staking, and the listed-security regime
One change is worth flagging. Staking and lending once extended the holding clock to ten years for the assets involved, a far harsher rule. That extension was removed from 2024, returning staked and lent crypto to the standard twelve-month period.
Listed securities — shares and ETFs — follow an entirely separate flat regime, not the §23 one-year rule. Gains there fall under Abgeltungsteuer at 25 percent, plus the 5.5 percent solidarity surcharge on the tax, plus possible church tax. That regime carries its own saver's allowance of €1,000 for a single filer or €2,000 for a joint filing, and equity-ETF gains benefit from Teilfreistellung, which exempts 30 percent of the gain. The two systems do not mix: crypto held privately can reach zero tax through time, while listed securities are taxed at a flat rate however long they are held.
Filing
Crypto and other private income are reported on the income-tax return, while capital income from listed securities runs through Anlage KAP and, for investment-fund income, Anlage KAP-INV. The filing deadline is 31 July. Given the all-or-nothing freigrenze and the precision the one-year rule demands, a holder with meaningful activity is well advised to confirm the treatment with a professional in the jurisdiction before filing. HQ Wealth tracks the per-lot holding period and applies FIFO so that the tax-free threshold is computed correctly in a German tax pack, rather than approximated from a blended balance.
Takeaway: Germany's one-year rule under §23 EStG makes the holding period decisive — private crypto held past twelve months is tax-free, inside it is taxed at the marginal rate. With FIFO and an all-or-nothing €600 freigrenze, knowing each lot's acquisition date is what separates a zero-rate disposal from a fully taxed one.