Portugal Makes U-Turn On Crypto-Friendly Taxes
Though widely considered to be one of the most crypto-friendly countries, Portugal is increasingly shifting its position on taxing cryptoasset gains – and now plans to tax gains on crypto held for less than a year.
According to Bloomberg, Portugal argues that the new rules are in line with other European countries’ crypto legislation, including Germany, where investors pay no taxes if they hold crypto for more than a year. Secretary of State for Tax Affairs António Mendonça Mendes was quoted as saying at a press conference in Lisbon that,
“It’s a regime that fits into our tax system and also to what is being done in the rest of Europe.”
While at the moment, the country doesn’t tax crypto gains if they’re not coming from professional or business activities, a provision in the proposed 2023 budget seeks the taxation of gains on crypto holdings that are held for less than 365 days at a rate of 28%, Bloomberg reported, citing the plan submitted to parliament on Monday.
Meanwhile, there will still be no taxes imposed on crypto held for longer than one year.
Furthermore, issuing new cryptoassets and mining operations would be considered taxable income.
There would be a 10% tax on the free transfer of cryptos and a 4% rate on commissions charged by brokers on crypto operations, it said.
The draft budget still needs to be approved in parliament.
The changing mood
Bloomberg noted the rise in the number of foreign residents living in Portugal over the past 10 years, saying that it went up 40% to 555,299 people in 2021, according to the country’s National Statistics Institute. “Some of these residents also benefit from a flat 20% tax on their income or a 10% tax on their pensions, according to the country’s so-called non-habitual resident program,” it noted.
When it comes to crypto specifically, Portugal has won itself a reputation as a crypto haven in recent years due to the fact that it does not impose a capital gains tax on crypto-related earnings. As recently as April this year, tax lawyers in Spain were reporting that Spaniards with crypto holdings were “fleeing” to Portugal to escape levies on their token-related profits. They warned that Spain was on the verge of becoming a “crypto desert” as the country ramps up its regulation of the sector.
But in the past few months, the Portuguese government and the financial sector appear to have grown keen to regulate crypto in line with other EU nations. Two bills proposing the imminent imposition of crypto-related tax were dismissed in parliament in May, but both originated from minor opposition parties. It was reported back then that the ruling party was likely to formulate its own bill.
As reported in August, multiple Portuguese banks – including the heavyweights Banco Comercial Portugues (BCP) and Banco Santander, as well as Caixa Geral de Depósitos, BiG, and Abanca – started closing accounts belonging to at least four crypto exchanges due to “risk management”-related reasons.
Notably, the exchanges were all registered with the Central Bank of Portugal, which polices domestic crypto trading platforms.
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