- No timeframe yet, but a draft bill is being discussed in this year’s budget
- Currently, the normal capital gains tax in Portugal for residents is a flat rate of 28%
Portugal’s days as alleged crypto tax heaven might soon be over. Portuguese finance minister, Fernando Medina, confirmed last Friday in the Parliament that his government is studying how to tax crypto gains in the country. There is no timeframe for when this will happen, he said.
Currently, capital gains from crypto investments, which are seen as a form of payment — a currency, but not an asset — under Portuguese tax law, are not taxed so long as they are not an individual’s main source of income.
“Several countries are building their models concerning this issue (crypto taxing) and we are going to build our own. Right now, I don’t want to make a commitment regarding a date, but we’re going to adapt our legislation and our taxation,” the minister said in a Parliament hearing about the country’s 2022 Budget. He was asked by members of Parliament about how Portugal is being considered a crypto tax heaven internationally.
The normal capital gains tax in Portugal for residents is a flat rate of 28% and the personal income tax is a progressive tax that ranges from 14.5% to 48%. The corporate income tax is a flat rate of 21%, but there are also local and state surtaxes.
The finance minister indicated there will be a balanced approach to how crypto is going to be taxed in the country, promising to follow principles like “tax justice” and “effectiveness”. He argued that there couldn’t be any “loopholes” that spare crypto investors from paying taxes, but he also argued against high levels of taxation that “would bring revenue down to zero.”
Moreover, Portugal would seek to learn from countries with more experience taxing crypto, the minister added, although he didn’t specify which countries.
Changes to the rules may impact the growing crypto community in the country. One example is the famous “bitcoin family” who moved to Portugal in February, citing zero crypto taxes as a reason.
“Crypto people that moved to Portugal are extremely mobile, curious to see what impact this will have on them and Portugal’s image as a crypto hub,” tweeted EU policy expert Patrick Hansen, Presight Capital’s crypto venture adviser.
The budget for 2022 was delayed after a political crisis in late 2021 and an early election in January. A radical left-wing party called Left Bloc has a draft bill to tax crypto gains already this year. However, with the Socialist Party in the majority in the Parliament, it is unlikely to be accepted as the government looks to undertake a more comprehensive review of tax legislation.
The reform that is being studied by the government will include other aspects of the tax legislation beyond capital gains, such as VAT (value-added tax). It will also cover anti-money laundering legislation, as well as regulation and supervision of crypto markets in Portugal.
The finance minister’s answers to members of Parliament suggest that Portugal is waiting on the final outcome at the European level of MiCA — the Markets in Crypto Assets regulation — as well as the Transfer of Funds Regulations (TRF) legislation, to go ahead with a broad legislative reform regarding crypto assets.
The 2022 budget is set to be approved in the Portuguese Parliament by the end of May.