Portugal’s finance minister has announced that cryptocurrency enthusiasts must take into account a 28 percent capital gains tax. A date for this new tax to come into effect has not yet been declared.
When is the party over?
For a long time, the crypto community saw Portugal as the promised land because the government was lenient with cryptocurrency. Many have therefore moved with their cryptos to the warm places of the southern European country.
Finance Minister Fernando Medina announced at a meeting of the Portuguese parliament that crypto assets in the country will soon be subject to capital gains tax, according to Portuguese news medium ECO. This is confirmed by António Mendonça Mendes, Secretary of State for Tax Affairs.
What is capital gains tax?
Capital gains tax is a tax on the profit made from the sale of cryptocurrency. Do you buy bitcoin for 100 euros, but do you sell it for 1100 euros? Then you have 1000 euros profit, on this profit you have to pay 28 percent tax. In other words, every time a Portuguese exchanges crypto for fiat money, he or she gives up more than a quarter of the funds.
When you report crypto gains as income in the UK, taxes on crypto asset follow the same range as any other income, from 0 percent to 45 percent, with the same personal threshold of £12,570.
For a long time, Portugal did not see cryptocurrency as a wealth or as an investment, but simply as another form of money. Therefore, crypto has been exempt from capital gains tax since 2018. Apparently the country has changed its mind so that they see crypto as an asset, allowing them to levy a 28 percent profit tax on it.
Portugal seemed like the promised land for a long time
Due to the fact that crypto was not taxed effectively, Portugal gained a reputation as one of the most attractive crypto tax havens in the world. It helps that Portugal is a country with good weather, beautiful cities, good food, wonderful beaches and a (somewhat) stable currency and government.
This has also caused a lot of crypto business, exchanges and events to move to the country. Portuguese politicians emphasize that the introduction of 28 percent capital gains tax should not be seen as a deterrent to companies.
Instead, Portuguese politicians have claimed that they have always intended to regulate crypto, and have looked carefully at how other countries have adapted their regulations. Portugal has been able to take decisions on this basis.
“It is an area where there is much more knowledge and much more progress, so Portugal can drink from international experience,” Medina told parliament.
More taxes on the way?
Portugal may be considering other crypto-related taxes for much longer. António Mendonça Mendes, Secretary of State for tax affairs, said at the same session that “cryptocurrencies are a much more complex reality than taxes alone when it comes to capital gains.” He further suggested that crypto in Portugal could soon be subject to value added tax, fees or even property taxes.
“We are evaluating the best regulation in this matter so that we can present not a legislative initiative to appear on the front page of a newspaper, but a legislative initiative that really serves the country in all its dimensions.”
It is that our kitchen is not that special, the weather is more often gray than blue and living is unaffordable, but otherwise all lovers of as little-tax-tax-on-crypto as possible might as well come to the Netherlands.
Not so black and white
It remains to be seen whether the new tax will really become that deterrent to businesses, as it could take years for this to become law in Portugal. If the legislation goes into effect, all these companies and people with crypto are likely to move to the Portuguese island of Madeira, where the tax rules for crypto remain favourable and bitcoin will soon become legal tender.