Portugal and Crypto
In the last few years, Portugal has been increasingly under the radar as being one of the most crypto-friendly countries in the world, recently featured in many international articles as being somewhat of a tax haven for crypto investors where you can easily buy items with crypto. One of the key reasons for this is the fact that crypto earnings are tax-free in the country, and cryptocurrency businesses face fewer hoops to jump through in terms of the legal and regulatory problems that they may experience in other countries.
Gains from the purchase and sale of cryptocurrencies are not taxed, depending on the nature of the activity in question. Companies that provide cryptocurrency-related services, however, are taxed on capital gains. The rate for this ranges from 28 to 35%.
New Rules for Buying Property in Portugal with Crypto
Buying houses with crypto is not a new topic. However, rules concerning buying property in Portugal have been revised and will be advantageous to investors looking to buy with this currency. The Order of Notaries (ON) has worked on a regulation that will give notaries clear instructions on how to create property deeds for the purchase and sale of houses in crypto. The ON will also be on the strict lookout for any signs of money laundering.
In the past, the ON has not registered purely digital businesses. This is due to the fact that when buying a house with cryptocurrencies, first the conversion into euros takes place and, after this, the property deed is then signed. However, with the new regulations, it will be possible to carry out real estate transactions with virtual currencies. This barter business, where goods are exchanged for cryptocurrencies will be very attractive indeed for crypto-loving investors in the future.
Crypto and Buying Property
According to the ON, the decision to establish standardized rules came about after significant interest in real estate negotiations concerning payment in bitcoins and other digital currencies, not least because Portugal is now regarded as one of the most tax-friendly countries in the world.
The ON has also commented that they are steadfast in fighting against money laundering, which is a worldwide challenge, while also creating clear, simple rules, that are straightforward so that real investors can use their crypto without problems.
There are two main models of negotiations involving crypto-assets and real estate negotiation. The first, and the most simple, is when the buyer’s broker converts the value of the digital assets into an official, more traditional currency. At the end of the transactions, the seller receives the money in the local currency in his bank account. With most businesses, this is the process of how a crypto and real estate negotiation has been conducted.
However, doubts creep in when negotiations involve the exchange of crypto assets between the parties when sellers also receive payment for transactions in cryptocurrency. And it becomes yet more complex if the funds are only in investment portfolios and there is no custody of brokers.
These operations are the primary focus of the new rules that were launched be set that intend to give notary officers the necessary tools to break down transactions in detail.
All things considered, cryptocurrencies are not deemed a real currency in Portugal. In this regard, transactions that use crypto as a payment method are classified as barter.
What the New Rules will Mean for You
The new rules were officially launched in April 2022. Under the new rules, notaries must receive in advance a series of documents from the parties that are interested in the business. Alongside the personal identification documents, complete records, from the time of acquisition and the storage wallets that are involved in the transaction are needed.
After this, the information is passed on to the country’s supervisory authorities – the DCIAP (Central Department of Investigation and Criminal Action) and the Financial Information Unit.
As long as there are no objections and after prior communication, the notaries can then proceed to carry out the property deed. Note that for businesses with values that are above EUR 200 thousand, there will be an additional stage of communication to authorities after the completion of the operation.
Notaries will also need to report the conversion of the value of these assets into a recognized currency, such as euros or dollars, given the high volatility of cryptocurrencies. This will be done at the time of signing the promissory purchase agreement and at the time of sale.
Alongside this, the ON has launched a training program for notary officers to be fully up to speed with the current situation. Since the beginning of 2022, the sector has received many requests about this type of real estate transaction. There is, however, no information to date on the number of deals that have already been closed this way, likely due to the fact that the rules have only very recently come into force in April.
How to Carry Out this Type of Transaction
First things first, when buying property in Portugal with crypto, it is crucial that you know where the money initially comes from. In other words, which bank account has the money come from, and what is the path the money has taken for it to reach the digital asset (bitcoin). You will be required to inform of the digital wallet number, identify the parties involved in the business, and, lastly, verify that the money goes from one wallet to another at the time of the transaction.
In essence, you will need to be able to follow the money’s journey, so that there is full transparency. This is because, for digital currencies, there is the potential for tax crimes and money laundering, for which the ON will be rigidly on the lookout.
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The following articles may be useful to you:
- How to buy property in Portugal
- Where to buy property in Lisbon?
- Portugal Crypto Tax & Cryptocurrency Ultimate Guide
- Bitcoin in Portugal: Everything you need to know in 2022
Our real estate division, Goldcrest, has also recently published their new book Your Expert Guide to Buying Property in Portugal. You can get your copy here.
Frequently Asked Questions About Buying a Property in Portugal with Crypto:
Can you buy a house with crypto in Portugal?
Yes, it is now possible to buy a property with bitcoin in Portugal. The first time this happened was in May 2022, when an investor bought a Portugal crypto house in the northern city of Braga. Selling your house for crypto is also possible.
Is crypto legal in Portugal?
Yes, crypto is legal in Portugal and the country has established itself as one of the most crypto-friendly countries in the world.
Is crypto taxed in Portugal?
Crypto earnings are tax-free in Portugal. In addition to this, crypto businesses have an easier route to set themselves up in the country, in terms of the legal and regulatory problems that they may experience in other countries.
Gains from the purchase and sale of cryptocurrencies are not taxed, depending on the nature of the activity in question. Companies that provide cryptocurrency-related services are taxed on capital gains, ranging from 28 to 35%.
Do I need to declare crypto in Portugal?
Crypto in Portugal is only taxable if crypto is considered to be your professional trading activity. If this is the case, you will need to open an activity as a trader and will need to pay taxes. Otherwise, crypto is not considered to be taxable.