How are capital gains on shares and crypto taxed in Germany?

Germany taxes investment income including dividends, interest, and capital gains from shares under Abgeltungsteuer (withholding tax / flat capital gains tax) at a flat rate of 25% plus the Solidaritätszuschlag and Kirchensteuer if applicable, bringing the effective rate to around 26.375% (or slightly higher with church tax).

This flat tax is withheld directly by German banks and brokers when you sell shares or receive dividends. You do not need to declare it separately on your return unless you want to check whether applying your personal marginal rate (if it is lower than 25%) would be more beneficial, or if you have losses to offset.

Crypto is different. Cryptocurrencies held for less than one year are subject to income tax at your marginal rate on any gain. If held for more than one year, gains are completely tax-free under §23 EStG, provided you did not earn yield from staking or lending during the holding period (which can restart or affect the exemption). This makes long-term crypto holding very tax-efficient in Germany. Capital losses from shares can offset capital gains from shares; crypto losses are handled separately under a different set of rules. The €1,000 annual exemption for private sales (Freigrenze) under §23 applies to crypto gains.