As cryptocurrencies continue to gain popularity and adoption worldwide, investors and traders need to understand the tax implications of their crypto activities. In Portugal, crypto taxes have undergone significant changes in recent years, making it crucial for individuals to stay informed and compliant with the latest regulations. This comprehensive guide will provide all the necessary information about crypto taxes in Portugal for 2024. From the tax rates and categories to reporting obligations and tips to minimize taxes, we’ve got you covered.
Do You Pay Cryptocurrency Taxes in Portugal?
In the past, Portugal was considered a “tax-free” zone for cryptocurrencies. However, significant changes were introduced in 2023, bringing cryptocurrencies within the scope of taxation. Under the Portuguese Personal Income Tax Code (PIT Code), income from cryptocurrencies now falls into three categories: capital (Category E), capital gains (Category G), or self-employment income (Category B). This means that individuals are no longer exempt from paying taxes on their crypto activities.
Understanding the Crypto Tax Rates in Portugal
The tax rates for cryptocurrencies in Portugal vary depending on the income category. The standard capital gains tax rate is 28%, which applies to short-term gains made within 365 days of acquiring the cryptocurrency. However, genuinely non-fungible tokens (NFTs) are currently excluded from taxation under the new crypto tax regime.
It’s important to note that Portugal has a progressive tax system, meaning that the tax rates increase as the income brackets rise. The tax rates range from 14.5% to 53% for different income categories. For example, capital income falls under Category E and is subject to a flat rate of 28%. On the other hand, self-employment income (Category B) is taxed at progressive rates of between 14.5% and 53%.
How Crypto is Taxed in Portugal
In Portugal, cryptocurrencies are taxed based on their category of income. Let’s take a closer look at each category:
Capital Income: PIT Category E
Category E covers remuneration in fiat from passive crypto investments, not based on any crypto transfer. This category is taxed at a flat rate of 28%. It is the default category when income from crypto does not fall into another specific category. In-kind crypto payments, such as using cryptocurrency to pay for goods or services, are also taxed accordingly.
Capital Gains Income: PIT Category G
If you hold crypto for less than 365 days, any capital gains made with fiat money will be subject to a flat tax rate of 28%. However, if your taxable income (including aggregate gains and losses) amounts to or exceeds EUR 78,834, these gains will be subject to progressive tax rates of between 14.5% and 53%. It’s important to note that this rule does not apply to certain crypto-assets like investment/security tokens, classified as securities.
Self-Employment Income: PIT Category B
Income derived from crypto asset issuance operations, such as mining or validating crypto transactions, falls under Category B. These earnings are taxed at progressive rates ranging from 14.5% to 53%. If you trade crypto professionally, your profits will likely fall into this category and be taxed as income.
Reporting Crypto Taxes in Portugal
As a taxpayer in Portugal, I must comply with the reporting obligations for crypto taxes. Personal income tax (IRS) applies to residents and non-residents who earn income in Portugal. Portuguese taxpayers must submit an annual tax return for income from the preceding year and provide additional relevant information about their tax situation. The submission window for tax returns is from April 1 to June 30, and filing the return online via the tax portal is obligatory.
Crypto taxpayers in Portugal must file their tax returns online through the tax portal using the Tax return (model 3) form. The tax is due by August 31 if the assessment has been made by July 31. If the evaluation is made after July 31, the tax should be paid within one month from the issuance of the assessment. Meeting these deadlines is crucial to avoid any penalties or late payment charges.
Tips to Minimize Crypto Taxes in Portugal
While crypto taxes are unavoidable in Portugal, there are several strategies you can employ to minimize your tax liability. Here are some tips to consider:
- Hold Crypto for Long-Term: Portugal still exempts long-term gains on cryptocurrencies held for more than a year from taxation. By keeping your crypto investments long-term, you can benefit from this tax exemption and reduce your overall tax burden.
- Please consult a Tax Professional: Tax regulations can be complex, and it’s always wise to seek advice from a qualified tax professional. They can help you navigate the intricacies of crypto taxes in Portugal and provide personalized guidance based on your situation.
By implementing these strategies and staying informed about the latest tax regulations, you can effectively minimize your crypto tax liability in Portugal.
Conclusion
Navigating the world of crypto taxes can be complex, but it’s crucial to stay informed and compliant with the regulations in your jurisdiction. In Portugal, cryptocurrencies are now subject to taxation, with different tax rates depending on the income category. By understanding the tax rates and reporting obligations and implementing tax-saving strategies, you can effectively manage your crypto tax liability in Portugal. Remember to consult a tax professional for personalized advice tailored to your situation. Stay informed, stay compliant, and make the most of your crypto investments in Portugal.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered legal or tax advice. Please consult a qualified professional for specific guidance tailored to your circumstances.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
