Key Highlights
- Germany’s Left Party and the Greens have proposed a change to eliminate the tax exemption on Bitcoin profits
- Parties believe that the current rule is unfair, which provides tax exemptions on Bitcoin holdings if it holds more than 1 year
- The proposal faced strong opposition and was quickly rejected in a Bundestag vote after facing opposition from the Alternative for Germany (AfD) party
According to the latest report, Germany’s Left Party and the Green Party have jointly proposed a major amendment to how Bitcoin profits are taxed.
The motion submitted to the German parliament, the Bundestag, demands an end to a popular tax exemption on Bitcoin holdings.
German Parties Want to Tax Bitcoin Holdings
Currently, if a person holds Bitcoin or other cryptocurrencies for more than 1 year, any profit from its sale is completely tax-free. These parties argue that this rule is outdated and unfair, which mainly favors wealthy investors over ordinary workers.
The proposal includes a change in the status quo of the current tax policy on Bitcoin holdings. They suggest scrapping this one-year holding period.
Instead, all profits from selling cryptocurrency would be subjected to a fiat capital income tax rate of 30%, no matter how long the digital assets like Bitcoin were held.
The supporters of this proposal, like Green MP Lisa Paus, also pointed out the enormous amount of energy used to mine Bitcoin as a big reason to bring this change. They believe that the tax break can encourage short-term trading and does not support sustainable investment. The additional tax revenue could be used to fund important social programs.
Isabelle Vandre, a member of the Bundestag from the Left Party, has mentioned that a large number of crypto investors are not paying taxes. She said, “Do you know how many of the 7 million crypto users are currently fulfilling their tax obligations? It’s exactly 3 percent.”
However, this proposal faced strong opposition and was quickly rejected in a Bundestag vote. The ruling government coalition, comprising the CDU/CSU and FDP Parties, supports maintaining the current tax-free rule.
Finance Minister Christian Lindner believes that these exemptions are important for encouraging the growth of Germany’s crypto market. Currently, the cumulative market capitalization of the cryptocurrency market stands at approximately $3.47 trillion, according to CoinMarketCap.
This proposal is also facing opposition from pro-crypto parties. For example, the pro-Bitcoin Alternative for Germany (AfD) party warned that such changes might hinder the growth of cryptocurrency-based innovations. It could also force investors to move their money to countries with friendlier tax laws, like Portugal or Switzerland.
United States Plans to Do Exactly Opposite
While countries like Germany demand a strict taxation policy for the cryptocurrency market, the United States, under U.S. President Donald Trump’s administration, is moving in the opposite direction. The U.S. administration has announced its support for easing taxes on small Bitcoin transactions.
The plan involves creating a “de minimis” exemption. This would mean that people would not have to report capital gains for crypto transactions under $600.
“In order to maintain our competitive edge, we must change our tax code to embrace our digital economy, not burden digital asset users,” U.S. Senator Cynthia Lummis said. “This groundbreaking legislation is fully paid-for, cuts through the bureaucratic red tape and establishes common-sense rules that reflect how digital technologies function in the real world. We cannot allow our archaic tax policies to stifle American innovation, and my legislation ensures Americans can participate in the digital economy without inadvertent tax violations.”
By doing this, the U.S. government wants to make it easier to use Bitcoin for everyday transactions, like buying a cup of coffee.
Europe’s Legislative Effort to Regulate Crypto
These national tax debates are happening within the ongoing legislative process after new European Union-wide regulations known as MiCA. It is a short form of the Market in Crypto-Assets. After this act came into effect, it created much-needed rules for the crypto innovations across the EU. It requires crypto service providers to be licensed and imposes strict rules on stablecoins.
