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Back in May we set out the reasons why Portugal had become a beacon for crypto investors. However, in that very article, we raised the prospect that a mooted change in the winds might potentially snuff out that beacon.
The ill wind stems from the publication of the 2023 State Budget document earlier in the week. It included a section in respect of the taxation of cryptocurrencies. Thus far, as can be gleaned from our previous article, profits have largely been untouched.
Instead, Portugal’s government is proposing a new 28% tax on capital gains from cryptocurrencies held for less than a year. This is consistent with the statements of the finance minister Mr Medina reported on this blog in May this year.
There is also a proposed income tax from other crypto activities such as mining or trading.
Other proposals include a 4% taxation fee on transfers of cryptocurrencies as a result of death plus stamp duties on commissions charged by crypto intermediaries.
Of course, Portugal’s parliament is still to have its say on whether these proposals are enacted.
Portugal will be aware that it is treading a fine line here. Portugal has become a magnet for crypto enthusiasts because of its benign tax position. Many such individuals are highly mobile and it might be that, if enacted, it causes a flight of crypto capital
If you have any queries about Portugal crypto tax changes, Portugal tax matters, or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
For further resource on crypto assets please see www.cryptotaxdegens.com.
In an eagerly anticipated announcement, the German Federal Ministry of Finance (BMF) has clarified its view on the taxation of cryptocurrencies.
In addition to the position on the buying and selling of crypto, the guidance also sets out the position on activities such as mining, staking, lending, and other transactions.
The German tax man has determined that units of cryptocurrencies are economic goods. These ‘goods’ are attributable to the owner as the holder of the private key.
In cases where the wallet and private key is managed by a third party provider (such as Coinbase or Binance) then the asset is attributable to the beneficial owner of the cryptoassets.
Like many jurisdictions, the key issue for determining the tax position on any profits generated is whether the transactions take place through personal activity or in the conduct of a commercial activity.
In this regard, the BMF has confirmed that investors who hold their cryptocurrency as personal assets can sell them free of tax as long as they hold the assets for at least one year.
This is welcome as, in previous missives, the BMF had stated that the holding period was ten years for private investors.
This one-year period does not apply if the cryptocurrency is held as business assets.
Again, as per other jurisdctions, in many cases the distinction between commercial and private activity might be a blurred one and is an area ripe for dispute.
It should be noted that if cryptocurrencies are held by a domestic corporation such as a GmbH then the income is always considered to be commercial.
The authorities have also set out the position for other blockchain activities including:
It seems to be the case that the German tax authorities will assume that such activity is commercial in nature.
The block creation leads to an acquisition (not to a production!) of the asset, which has to be recognized at the market price at the time of acquisition (profit-increasing). Only at the time of the realization of the proceeds from a future sale are any acquisition costs to be deducted from the profit.
Only the staking (without taking over the block creation), as well as, if applicable, the participation in mining and staking pools or a cloud mining service may again fall within the scope of private asset management. However, again, this depends on the individual case.
The authorities has also set out its view on the acquisition of cryptocurrencies received by private investors in the context of airdrops. Here, the receipt of the new tokens may be taxable where the recipient of the airdrop has dome something in return for the airdrop.
Perhaps surprisingly, the authority considers it sufficient for this purpose that the recipient is required to provide contact details on an online form.
Where nothing is done in return for the airdrop then there are no tax consequences (although German gift taxes might be in point on the receipt).
Of course, this additional clarity is helpful. Of course, the fact that an private investor can dispose of assets free of tax after 12 months is very welcome for relevant investors.
It remains to be seen whether there will be further missives from the German tax authorities that include their position regarding Non‑Fungible Tokens (NFTs) and other types of assets and activities.
If you have any queries about this article, German cryptocurrency tax, or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
For further resource on crypto assets please see www.cryptotaxdegens.com.
This article provides a brief overview of Cyprus tax residency in relation to individuals, the implications of such a status and some of the practical considerations.
Firstly, an individual who is present in Cyprus for 183 days will be resident for tax purposes in Cyprus.
In addition, one will also be resident for tax purposes in Cyprus under the so-called 60 day rules where each of the following is satisfied:
Cyprus personal income tax is imposed on the worldwide income of individuals that are resident for tax purposes in Cyprus.
However, income from dividends and (most types of) interest income that is received by individuals are exempt from personal income tax
From 16 July 2015, individuals are subject to Special Defence Contribution on dividends and interest income where the person is both both Cyprus tax resident and Cyprus domiciled.
Capital gains are also not usually taxable in Cyprus unless they have arisen in respect of Cyprus situs immovable property
Individuals who are not tax residents of Cyprus are taxed only on certain types of income accrued or derived from sources in Cyprus.
In order to obtain a certificate of tax residence, all supporting documents must be submitted to the Tax Department of Cyprus. These docs must be stamped.
If the documents are in any other language than English or Greek then they must be translated.
If an individual is considering relocating to Cyprus, expert advice should be taken with respect to Cypriot as well as cross-border tax implications arising from the relocation.
If you have any queries about this article, tax residency in Cyprus, or Cyprus tax matters more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
Portugal is often held up as an attractive place for crypto investors. More generally, it has an attractive regime for migrants moving to Portugal, who might be able to avail themselves of its Non-Habitual Residence (“NHR”) regime.
However, where the NHR regime is clear, the tax law around crypto-assets is more as a result of what the law does NOT say.
As stated above, Portugal has become a popular destination for those seeking a safe harbour for crypto gains.
It is estimated that between March and May 2020, the purchase and sale of cryptocurrencies in Portugal increased by 60% year on year. However, up until now, the Government has not acted to clarify or expand its legislation to cater for this relatively new asset.
In Portugal, there are three potential categories under which gains on the buying and selling of cryptocurrencies could be caught. These are as follows:
In respect of the first of these, the tax code specifies which cases will be subject to tax a as a capital gain. However, the class of items is an exhaustive list. In other words, the law only applies to something which is on the list. As crypto assets are not on the list they are not taxable.
In respect of Category E, this does not apply as the buying and selling of cryto-assets is not a yield on capital.
Category B is the one where we might fall into the tax trap. However, it is only likely to apply to certain cases. This category will apply where any crypto profits are as a resuly of a regular professional activity. Of course, this might be relatively easy to determine in extreme cases, but the lack of certainty for those in more marginal cases is a concern.
The current position means that Portugal is on a list of countries that still do not tax profits from this type of asset. Hence, why Portugal has become an attractive destination for crypto investors.
However, nothing lasts forever.
Indeed, on 13 May 2022, finance minister Fernando Medina confirmed that the Government is contemplating how it might tax crypto gains in the future. He did say there were no firm proposals to introduce any such legislation.
If profits from the buying and selling of crypto assets was brought into the tax net in Portugal, then it would seem likely they would be subject to tax at 28%.
However, Mr Medina did acknowledge that an imposition of high levels of tax might “bring revenue down to zero” so he is at least aware of the tight rope his Government might be treading.
If you have any queries about this article, Portugal crypto tax, or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
For further resource on crypto assets please see www.cryptotaxdegens.com.