Tax on Crypto from a corporate perspective

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Tax on Crypto from a corporate perspective

by | Tuesday, 30 November 2021 | Cryptocurrency, Investment

Crypto Corporate Tax

Accounting rules

Corporate tax on crypto currencies is not as complex, as in the case with the Portuguese personal income tax.

First and foremost, one must first consider that, currently, there are no specific accounting rules for crypto assets. Furthermore, in the absence of such accounting rules, international accounting regulatory authorities have started to look into an economic reality that is increasingly common.

Nevertheless, the taxation of income of companies and similar entities subject to Corporate Income Tax Rate in Portugal related to cryptocurrency, whether it has served as a means of payment or accounting capital gains resulting from its transmission or valuation, do not raise any doubts from a Corporate Income Tax Code perspective.

Corporate tax on crypto

Portuguese Corporate Income Tax incidence rules are quite broad. Meaning that companies engaged in the sale of cryptocurrency are, subject to Corporate Income Tax on their worldwide generated income. The broad definition of profit encompasses not only the notion of profit as the difference between income and expenses from a normal or occasional source that is recorded in the income statement but also the positive and negative asset variations not reflected in the income statement.

The concept of asset variations, abovementioned, includes, under law, potential or latent capital gains/losses, even if they are expressed in the accounting, including legally authorized revaluation reserves. This may end up affecting the company’s taxable profit, which in turn will be subject to the current 14,7% (Portuguese company incorporated in the Autonomous Region of Madeira) or 21% (Portuguese company incorporated in the mainland).

The income of a company engaged in the activity of trading cryptocurrency will, in principle, be determined for tax purposes at the end of each calendar year, in accordance with the general principles established by Portuguese Tax Law and regardless of when the income is received from the respective sale of cryptocurrencies. This results from, in the case of corporate taxation, the relevant time for determining taxable income being the moment when the right to receive or the obligation to pay arises, regardless of when this receipt or obligation to pay occurs.

Current situation

Despite the fact the Assembly of the Republic (Portuguese parliament) is yet to approve specific legislation on the taxation of cryptocurrencies and the fact the Portuguese Tax and Customs Authority has not issued a formal opinion on the matter, one must observe that the Portuguese Corporate Income Tax code has a very broad definition of profit, as previously mentioned.

In comparison to other jurisdictions with favourable regulated rules concerning corporate tax on crypto currency, Portugal may not yet be desirable to some investors wishing to relocate their companies or incorporate new ones in the crypto sector. However, the laws are constantly changing, and taxation rules are under review.

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.

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