Portugal Crypto Tax & Cryptocurrency Ultimate Guide

Portugal’s 2023 Budget Draft Proposal: Update on Crypto in Portugal

Portugal’s 2023 budget draft proposal, which was released on 17 October 2022,  has included information on crypto tax income. Under the new proposal, there will be a 28 percent income tax on cryptocurrencies held for less than a one-year period. Alongside this, crypto transactions would also be subject to taxation. 

Crypto is defined in the proposal for the State Budget Bill as, “any digital representation of value or rights that may be stored electronically, using the distributed register or similar technology.” 

The State Budget Proposal 2023 states that the sale of crypto assets will be subject to the capital gains regime. The gain will be determined as the difference between the realization value and the acquisition value. Note that the realization value is the market value on the date of sale.

The positive balance between capital gains and capital losses is taxed at a rate of 28%, although aggregation is a viable option. Negative balances that are ascertained in a specific year can be carried forward to the following five years if the taxpayer opts for aggregation. 

The tax would only be applicable to crypto owned for less than a year. Gains from crypto held for longer than this period of time (365 days) would still be exempt. Free crypto transactions would be taxed and there would be a 4 percent rate applicable to commissions charged by intermediaries. 

Operations related to issuing crypto assets, which includes mining, or the validation of crypto transactions through consensus mechanisms, are considered commercial and industrial activities and fall under the tax category Business and Professional Income. 

The budget is still being discussed and is subject to approval within the Parliament in the coming weeks.

 

Economic Stability and Innovation Makes Portugal a Hotspot for Businesses

Since the financial crisis, successive governments in Portugal have introduced a number of incentives to encourage investment in the country. The result? Today Portugal’s economy is in better shape than it has been for decades.

This is largely due to a few very successful measures that have brought billions of euros worth of investment to Portugal, as well as a sudden surge in popularity in the country’s tourism sector.

The Golden Visa program, in particular, has been responsible for at least €4 bn euros worth of investment in Portuguese real estate, and the non-habitual tax regime has helped to bring many professionals of high cultural and economic worth to the country.

Low living costs and high quality of life make Portugal an excellent place to live and start a business and has attracted many entrepreneurs and professionals from across the globe. Both the economy and the real estate market have been undergoing periods of stable growth, and are forecast to continue in the coming years.

Cryptocurrency Laws in Portugal

What are the cryptocurrency regulations in Portugal?

The Portuguese law officially follows EU regulation on cryptocurrency, which stipulates that gains from the buying or selling of cryptocurrency should not be subject to VAT. Beyond this, there is no other specific legislation on cryptocurrency.

This document from 2016 (in Portuguese) outlines the official treatment of cryptocurrency in Portugal.

Recent clarification to cryptocurrency law in Portugal

The legal status of cryptocurrency in Portugal was clarified in a statement by the Portuguese tax authorities (Autoridade Tributária e Aduaneira) given to a company that is planning to begin mining bitcoins in the country. The statement, which was subsequently published in the Journal de Negocios reaffirms that cryptocurrency should be treated the same as any other currency in Portugal.

Portugal crypto tax

Cryptocurrencies, as with other types of currency, can generate income in a number of different ways:

• Gains from the sale and purchase of coins
• Profit from commissions charged in services relating to the acquisition of use of cryptocurrency
• Profit derived from the sale of products or services for cryptocurrency

The Portuguese tax authorities are quoted as saying that cryptocurrency “An exchange of cryptocurrency for ‘real’ currency constitutes an on-demand, VAT-free exercise of services.”

This means that any profit from the purchase and sale of cryptocurrency in Portugal will not be taxed, nor will the exchange of cryptocurrency for other currencies.

The authorities have also clarified that no income tax must be paid by individuals who receive payments in cryptocurrency, however, companies registered in Portugal dealing in cryptocurrency are taxed on capital gains (between 28% and 35%).

In Portugal, tax is paid on a sliding scale, although many professionals considering moving tax residency to Portugal can also benefit from the non-habitual tax regime (NHR), which allows for exemptions and reductions in tax over a 10-year period for individuals of high cultural or economic worth.

Click here to find out more about the NHR regime in Portugal.

Portugal Crypto Tax- Tax on Cryptocurrency Gains in Portugal

As mentioned, gains accrued from the acquisition and sale of cryptocurrencies are not taxed in Portugal. However, companies that specifically provide services related to cryptocurrency are taxed on capital gains, between a sliding scale of 28% to 35%.  Note, that your Portugal bitcoin trading can be considered tax-free if it’s not done regularly, but if it’s your primary source of income, then you must file a tax return and pay taxes on your earnings.

Some factors to consider regarding tax on cryptocurrency gains:

• How frequently do you trade in crypto (daily, weekly, monthly?
• How long you hold your financial products
• How many trading platforms you’re using
• Your profit level
• Your primary activity to generate income from

Important note: You’re not going to be viewed as a professional cryptocurrency trader just because one of the qualities stated above is applicable to your circumstances. Nevertheless, it’s recommended to consult a tax lawyer to double-check what tax, if any, is applicable.

Why is Portugal best for cryptocurrency traders?

In many countries around the world, cryptocurrency investment and trading are facing ever-tightening regulation. This can cause problems specifically for investors in the US, where having American residence can create difficulties, especially during the coin mining process.

Can you pay for services in cryptocurrency?

As Portugal increasingly opens up to the use of cryptocurrencies to pay for services, companies like Global Citizen Solutions  (GCS) are revolutionizing the way investors can pay for Golden Visa services. At present, you can pay for GCS’s services in cryptocurrencies like Ripple, Bitcoin, and Etherium. Payment is accepted through the trusted portal Coingate.

Cryptocurrency regulation around the world

Cryptocurrencies have come under increased scrutiny in many countries in recent years, particularly in countries such as the US, there have been calls for increased regulation.

As a result, ICO’s (initial coin offerings) will not accept those with US addresses or residences. For this reason, it makes sense to obtain residency or even citizenship in a cryptocurrency-friendly country like Portugal.

The non-habitual tax regime means Portugal is tax-friendly for investors

The Portuguese government has brought in a number of different incentives to ensure that the country offers investors optimal conditions to succeed.

This includes the NHR regime, which allows special allowances for startups and investors of high cultural and economic worth.

Portuguese law is cryptocurrency-friendly, meaning that any individual profit from the purchase and sale of cryptocurrency in Portugal will not be taxed, nor is the exchange of cryptocurrency for other currency.

Insurance against future change

The Golden Visa program in Portugal means that nationals from outside of the EU can obtain citizenship through investment.

In order to acquire residency and subsequently citizenship in Portugal, it is not required that investors relocate to the country, as the Golden Visa program has a “stay requirement” (number of days required to maintain residency) of just 7 days per year.

This can be particularly useful for cryptocurrency traders, as it can provide extra security against future regulation in their home countries. Applicants can invest in the Golden Visa scheme as a way to ensure they will have more opportunities open to them in the future, for both themselves and their children.

How does Portuguese law apply to cryptocurrency investors?

Income tax for cryptocurrency in Portugal

Individuals who earn a salary in cryptocurrency are not charged income tax. However, companies based in Portugal who pay their employees in cryptocurrency are required to pay income tax.

Income tax in Portugal is based upon activity and the profit made from it. This means that while Portugal bitcoin transactions themselves are not taxed, if the transfer of Portugalcryptocurrency is associated with a product or a service, then an invoice must be issued and the service must also be taxed.

VAT on Portugal crypto

According to statements released by the Portuguese tax authorities, cryptocurrency under Portuguese law should be treated exactly the same as any other currency, which means that Portugal crypto exchanges are not subject to VAT.

Capital gains tax

Gains made from the purchase and sale of cryptocurrency is not taxed, as is the same with any other currency. However, companies which offer services relating to cryptocurrencies are taxed on capital gains, on a sliding scale between 28% and 35%.

The non-habitual resident tax regime

Investors in Portugal who have not been tax residents in the country for the previous 5 years can benefit from the non-habitual tax regime.

Under the NHR, you may be able to monetize your personal cryptocurrency profits in Portugal, exempt from capital gains tax.

Click here to find out more about the NHR regime in Portugal and whether you are eligible for tax exemptions or reductions.

Golden Visa Program and Cryptocurrency in Portugal

The Golden Visa program in Portugal is another added benefit to investing in Portugal.

The citizenship by investment program allows individuals from outside of Europe to obtain Portuguese residency through investing upwards of €350,000 in real estate, venture capital funds or businesses in the country.

After 5 years of continued investment in Portugal, investors can obtain a European passport, giving them the right to live and work anywhere in the Schengen area.

Dependents can also obtain residency permits, including spouses, parents, and children under the age of 18, or are in full-time education.

Key benefits of the Portugal Golden Visa program

– Low stay requirement

Applicants are only required to spend 7 days per year in Portugal, meaning that investors can continue living in their home country and do not need to relocate.

– Insurance against future instability

Having two passports provides security against future instability. Portugal has a stable government and economy, and making it an excellent choice for citizenship through investment.

– Strong European passport

The Golden Visa residence permit allows holders to live and do business in Europe, and with a Portuguese passport.

– Freedom of travel

A Portuguese passport allows you to travel to 183 countries worldwide without a visa.

– Passport after 5 years

The Portuguese Golden Visa program allows investors to acquire a passport after just 5 years, shorter than other popular programs in Greece (7 years) and Spain (10 years).

– Range of affordable investment options

Portugal has a dynamic market with a variety of investment options. The most popular choice when it comes to Golden Visa applications is an investment in real estate, but there are also many investment funds which fulfill the requirements of the program.

 -Not blacklisted by OECD

Unlike many other programs, the Portugal Golden Visa is not blacklisted by the OECD.

Bitcoin and cryptocurrency services in Portugal

Bitcoin ATMs in Portugal

There are a number of different places in Portugal where you can withdraw bitcoin and other cryptocurrencies, including 3 bitcoin “ATMs” in Lisbon.

Cryptocurrency payment for services in Portugal

There has been a recent growth in businesses dealing with cryptocurrency in Portugal, one of which is trust, which enables cryptocurrency payments for businesses.

Global Citizen Solutions

At Global Citizen Solutions we assist investors looking to apply for the Golden Visa program in Portugal.

We have a 100% success rate when it comes to Golden Visa applications, and have helped dozens of cryptocurrency traders.

Take a look at our guide to find out more about the Portugal Golden Visa, or schedule an initial consultation with one of our team to discuss your Golden Visa investment options.

Frequently Asked Questions About the Portugal Golden Visa and Cryptocurrency

Is Portugal cryptocurrency-friendly?

In recent years Portugal has positioned itself as one of the most economically innovative countries in Europe. When it comes to cryptocurrency in Portugal, the situation is no different. The Portuguese government has demonstrated a commitment to making cryptocurrency-friendly policies.

Is Portugal crypto tax free?

In Portugal VAT is not charged on cryptocurrency transactions, and any payments made using cryptocurrency are not taxed.

Why is Portugal best for cryptocurrency traders?

In many countries around the world, cryptocurrency investment and trading are facing ever-tightening regulation. This can cause problems specifically for investors in the US, where having American residence can create difficulties, especially during the coin mining process.

What is the Portuguese Golden Visa?

The Portugal Golden Visa is a residency by investment program. It allows investors to obtain Portuguese residency by making an investment in the country and also provides a clear route to citizenship.

Which country has no tax on cryptocurrency?

While Portugal doesn’t tax on cryptocurrency, it’s not the only country out there. Belarus, El Salvador, Singapore and Malaysia are just some of other countries that have a wide range of benefits for bitcoin dealers looking to minimize their tax burden.