Section 23 EStG: Your Guide to German Crypto Tax Rules

When working with Section 23 EStG, the part of Germany's Income Tax Act that deals with private sale transactions, including crypto‑asset swaps. Also known as "EStG Section 23", it determines when a profit from selling digital coins is tax‑free or taxable.

Another key player is cryptocurrency taxation, the set of rules that tells German residents how to report coin trades, staking rewards and airdrops to the tax office. It directly influences how capital gains, profits realized from the sale of assets held for less than a year, are treated under Section 23 and whether you owe tax.

Finally, the emerging topic of cryptocurrency airdrop tax, the obligation to declare free tokens received from projects, often falls under the same private‑sale framework. If an airdrop lands in your wallet and you later sell the tokens, the gain may be subject to Section 23 rules depending on the holding period.

How Section 23 EStG Connects to Everyday Crypto Activities

Section 23 EStG encompasses any private sale of assets that aren’t part of a commercial trading business. That means buying a meme coin on a DEX and flipping it within a year triggers a taxable event. The law also requires you to calculate the profit by subtracting acquisition costs from the sale price, then apply your personal income tax rate.

Because most crypto traders operate as private individuals, the rule “holding period longer than one year = tax‑free” is a huge motivator. If you hold a token for 365 days or more, the profit slides out of the tax net, even if the price skyrocketed. This exception is why many German investors track the exact dates of each purchase and sale.

But the picture changes when you receive tokens via an airdrop. The airdrop itself is treated as income at the market value on the day you gain control. When you later sell those tokens, the profit is split: the original market value becomes the acquisition cost, and any extra gain falls under Section 23. If you sell the airdropped coins within a year, the whole increase is taxed as a private sale.

Staking rewards add another layer. The moment a reward is credited to your wallet, it counts as taxable income. Should you sell the reward afterward, the subsequent profit follows the same one‑year rule. Many German guides suggest moving staking earnings to a separate wallet to simplify tracking.

For DeFi users, swapping tokens on platforms like MCDEX or VoltSwap still counts as a private sale. Each swap creates a new acquisition cost based on the market price at that moment. Keeping a spreadsheet of swap dates, amounts, and prices is the safest way to stay compliant.

When it comes to NFTs, the same principles apply. Buying an NFT and flipping it within a year triggers a taxable private sale. The acquisition cost includes the purchase price plus any gas fees paid on the blockchain.

In practice, many crypto investors use specialized tax software that pulls transaction data from wallets and exchanges. The software can automatically calculate which trades fall under Section 23, flag those that need reporting, and generate the required forms for the German tax office (Finanzamt).

Understanding Section 23 EStG is essential because it sets the line between tax‑free and taxable crypto activity. Ignoring the one‑year holding rule can lead to unexpected tax bills, especially after a big market rally.

Below you’ll find a curated collection of articles that dive deeper into specific crypto topics—play‑to‑earn tokens, airdrop verification, DEX reviews, and more—all examined through the lens of German tax compliance. Use these guides to see how the rules we’ve outlined apply to real‑world projects and to sharpen your tax‑savvy investing strategy.