Portugal Crypto Tax in 2023 ought to become a reality.
“The Portuguese Government determines in the draft State Budget for 2023 that capital gains obtained with crypto assets “held for less than a year” will now pay a rate of 28% “without prejudice to the aggregation option [progressive tax rates]”. On the other hand, profits from crypto assets held for more than 365 days are exempt from taxation.
In the new budget proposal, which is still to be discussed in the Assembly of the Republic, the Portuguese Government proposes a “new crypto asset taxation regime. Some novelties are an amendment to the Portuguese Personal Income Tax Code. Still, the new regime does not stop there: “The aim is to create a broad and appropriate tax framework applicable to crypto assets, in terms of taxation of income and wealth,” argues the report accompanying the draft State Budget for 2023 presented to the President (Speaker) of the Assembly of the Republic.
The main novelty concerns capital gains obtained with crypto-assets held for less than a year, as is the case of profits generated by selling cryptocurrencies such as bitcoin. These gains are exempt if the assets are held for more than a year. The regime, similar to that of stocks, means taxpayers must declare these transactions and pay a 28% IRS rate or opt for aggregation.
Also, in terms of personal income tax, the Government proposes to “tax income from operations related to the issuance of crypto assets, including mining, or the validation of crypto transactions through consensus mechanisms. [This is in line with the 2016 opinion issued by the Portuguese Tax and Customs Authority upon the request for binding information received on the taxation of crypto asset capital gains, which means being subject to the progressive tax rates and social security contributions as a freelancer!]
[Further to the above, any salary paid in crypto assets will be taxed following the rules applicable to the income received in kind.]
In addition to this type of taxation, the new regime expressly foresees “the taxation of free transfers of crypto assets, as well as the incidence of Stamp Tax on commissions charged in the intermediation of transactions relating to crypto assets, subjecting these to a rate of 4%,” writes the Government in the proposal. The Portuguese Government states that the Portugal Crypto Tax proposal “in line with the generality of financial operations”.
It is important to note that the Government has not confined itself to the taxation of cryptocurrencies. The draft State Budget for 2023 does not refer to the concept of “cryptocurrency”. Instead, the document uses the concept of “crypto-asset”, which is broader and is defined as follows: “A crypto-asset is considered to be any digital representation of value or rights that can be transferred or stored electronically using distributed recording or similar technology.”
Thus, in practice, other crypto assets are also covered, as with NFTs (non-fungible tokens). In general terms, these certificates prove ownership of a digital asset, which gained a lot of popularity in 2021, is very much associated with the worlds of art and video games, but not only.”
We note that the Portuguese Government holds the absolute majority (PS) in the Portuguese Parliament, so the approval of the abovementioned taxes is highly likely.
Furthermore, and to ensure compliance, the Portuguese Government aims to force natural or legal persons, bodies and other entities without legal personality, who provide custody and administration services for crypto assets on behalf of third parties or manage one or more crypto assets trading platforms, must communicate to the Tax and Customs Authority Tax and Customs Authority, by the end of January of each year, for each taxpayer, through an official form, the operations carried out with their intervention, regarding crypto assets.
If the above legislation comes into effect, the holding period of the crypto assets acquired before the date this law comes into effect is taken into account for the purposes of counting the above holding period.
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