2 December 2022

Portugal Prepares to Tax Crypto Gains at Rate of 28%, Draft Budget Unveils

Portugal Prepares to Tax Crypto Gains at Rate of 28%, Draft Budget Unveils

Authorities in Portugal intend to impose a levy on gains from short-term crypto investments with the state budget for next year. The document, which still needs the approval of Portuguese lawmakers, signals a change in the EU nation’s positive attitude towards crypto assets.

Government of Portugal Proposes New Tax for Cryptocurrency-Related Gains

In the past few years, Portugal has established itself as one of Europe’s most crypto-friendly countries, with a decision to refrain from taxing gains derived from crypto trading, unless they’re part of a business activity, playing a key role. It attracted many crypto enthusiasts. However, that’s likely to change in the near future if the parliament adopts the budget the government is proposing for 2023.

The draft features a provision allowing authorities to tax gains on crypto holdings held for less than a year at a rate of 28%, Bloomberg reported quoting the document. Portuguese lawmakers rejected similar proposals earlier this year. Under the latest one, the exemption should remain in place only for crypto assets held for more than a year.

The document submitted to the legislature on Monday further reveals that income from the issuance of new coins and cryptocurrency mining operations will be considered taxable, too. The plan is to also introduce a 10% tax on the free transfer of cryptocurrencies and a 4% levy on commissions charged by brokers on crypto operations.

The executive power in Lisbon says that the proposed tax rules correspond to legislation already adopted in other EU jurisdictions. It suggests Germany as an example, the Union’s economic locomotive, where crypto investors are relieved from tax obligations if they hold the digital assets for more than a year. During a briefing, Secretary of State for Tax Affairs António Mendonça Mendes commented:

It’s a regime that fits into our tax system and also to what is being done in the rest of Europe.

Lisbon’s move comes as institutions in Brussels are working to introduce a comprehensive regulatory package known as the Markets in Crypto Assets (MiCA) legislation that should be implemented across the EU. Last week, members of the European Parliament also urged for the adoption uniform crypto tax rules in all member states.

Do you see Portugal losing its attractiveness as a crypto-friendly destination if the proposed change in its tax regime is adopted? Share your thoughts on the subject in the comments section below.

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