A draft crypto tax reform from Germany’s Federal Ministry of Finance has drawn criticism from industry figures over a proposed rule for taxpayers who cannot adequately document how they acquired their digital assets. Patrick Hansen, Circle’s senior director for EU strategy and policy, said the measure could leave some investors paying tax on an assumed basis that does not reflect their real gains.

Under the proposal described by Hansen, if a taxpayer cannot provide credible purchase information for cryptoassets, the tax office would apply a substitute assessment. In that case, authorities would assume the assets were acquired after December 31, 2026, and calculate tax using 50% of the eventual sale proceeds.

What the draft rule would do

The disputed element of the draft reform is a 50% substitute assessment basis for crypto holdings where the taxpayer cannot present convincing acquisition records. Rather than relying on verified purchase prices or dates, the method would use half of the sale value as the basis for taxation.

Hansen said that framework could result in tax outcomes that are disconnected from what many holders actually earned. He argued that the proposal effectively assumes a strong rise in asset prices, an assumption he said looks questionable given that bitcoin is below its level of a year ago and a number of other cryptoassets have performed worse over the same period.

Hansen’s warning for retail users

In public comments, Hansen said the burden would fall most heavily on less experienced retail users. His concern is not only about people with large gains, but also about ordinary investors who may not realize the rules have changed or who are unable to provide clean documentation for purchases made over several years.

He argued that some users may have bought crypto with little profit or even at a loss, yet could still face an inflated tax calculation if they cannot prove their acquisition costs to the satisfaction of the authorities. In Hansen’s view, that would mean normal consumers end up paying far too much tax if the proposal is adopted without adjustment.

Why documentation matters

The issue is especially sensitive for holders who move funds between self-custody wallets, foreign platforms, and German exchanges. According to tax lawyer Dr. David Hötzel, an associated partner at Poellath, those situations could become subject to deductions under the proposed approach if documentation is insufficient.

Hötzel said the 50% mechanism is not final, but he also noted that it acknowledges significant liquidity risks. Even where the actual profit is low, the substitute tax base could still trigger a high provisional deduction, making record-keeping central to the treatment of existing holdings.

What is confirmed so far

At this stage, the 50% substitute assessment remains part of a proposal rather than a settled rule. Both Hansen’s criticism and Hötzel’s legal commentary point to the same immediate takeaway: the draft has raised concern because taxpayers without reliable purchase records could be exposed to an assumed tax basis that may exceed their real economic gain.

The next confirmed point is that the measure is not yet final. For now, the debate centers on whether the draft should be revised before adoption, particularly around how Germany would treat crypto holders who cannot provide credible evidence of acquisition dates and costs.

Source: news.bitcoin.com