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  • Tag Archive: Non Habitual Residence

    1. Portugal crypto tax: Buying and selling crypto assets in Portugal

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      Introduction – Portugal crypto tax

      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.

      Portugal as a growing hub for crypto

      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.

      Current position

      In Portugal, there are three potential categories under which gains on the buying and selling of cryptocurrencies could be caught. These are as follows:

      • Capital Gains (Category G) – such as sale of an apartment or shares
      • Capital Yields (Category E) – such as property rental or dividends
      • Professional Income (Category B) – Consultancy fees etc

      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.

      A change in the winds?

      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.