Portugal Crypto Tax Haven to end in 2023
The Assembly of the Republic approved a “new crypto asset taxation regime” with “the aim to create a broad and appropriate tax framework applicable to crypto assets, in terms of taxation of income and wealth” from FY2023 onwards, putting an end to Portugal Crypto Tax Haven.
Gains from the lucrative sale of crypto-assets that do not qualify as securities will henceforth be treated as capital gains for the purposes of calculating personal income tax, with a 28% capital gains rate. Gains and losses associated with the successful sale of crypto assets held for a duration of 365 days or more are disregarded for taxation purposes. The time before the law takes effect may be accounted for. Thus, the new regime is applicable to cryptocurrency assets bought before and after January 1.
Furthermore, there are no taxes if the disposal consists of crypto assets rather than fiat money. In this instance, the crypto assets received are given the purchase value of the provided crypto assets. At the same time, the accounting for the 365 days begins over with each transfer of crypto assets for other crypto assets. Regardless of how many trades took place after the initial acquisition, if the crypto assets obtained are converted into fiat money, the capital gain that must be taxed will be calculated based on the acquisition value.
Given the above, the current tax law seems to indicate that in practice, whenever a taxpayer is satisfied with the gains in crypto assets, it is sufficient to convert those gains to a specific stablecoin (to stabilize the value and mitigate the risk of volatility) and wait 365 days before proceeding with the exchange of the stablecoin into fiat currency and, thus, enjoy the tax exemption (this being, essentially, the result of the legislator’s decision not to distinguish between stablecoins and crypto assets).
Nevertheless, it remains to be seen how the personal income tax reporting concerning the above matter is to be rolled out by the Portuguese Tax and Customs Authority. However, one thing is certain: Portugal is no longer a crypto tax haven and those wishing to relocate and enjoy the lowest taxation possible while trading on a regular basis ought to think about income restructuring before relocation.
This article is provided for general information purposes only and is not intended to be, nor should it be construed as, legal or professional advice of any kind. Should you have any questions, please do not hesitate to contact us.
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