In the current framework, only the crypto that is used as a medium of payment in exchange for the performance of professional activities is being taxed in Portugal.1Apart from that, Portugal applies zero tax on crypto gains now, although, in principle, it applies a ratio of 28% of the tax for the capital gains due to financial investment.2
As the calendars showed the year 2022, it seemed the crypto picture in Portugal was starting to change. From March to the end of May, it was rumored that Portugal plans to tax cryptocurrencies, and even the country’s officials were leaking these tax-oriented policies towards crypto assets.3 As the Portuguese news forum, ECO confirms Fernando Medina, Minister of Finance, declared that crypto assets will be subject to capital gain taxes in the near future.4
Minister Medina did not set a strict time limit for the taxation of crypto in his previous explanations; however, he highlighted that they want to take action “as soon as possible” while observing tax fairness and the country’s status of being a crypto hub.5
What has happened?
Recently the Portuguese Congress rejected two bills proposing taxation for crypto.6On May 25, 2022, during the budgetary negotiations, the parliament voted negatively on the enactment of the said proposals, and some of the Parliament members presented their criticism on the handling of the issue and the lack of tax regulation on the taxation regarding crypto.7
The taxation of crypto gains above 5,000 Euros and the applying capital gains tax for crypto separately were the basis of the rejected proposals.8 Following the rejection, Portugal still keeps its zero-tax policy on crypto, even for a short period.
Although the Parliment rejected the bills and proposed tax policies, including capital gain tax application, are not in force right now, those considering making long-term crypto decisions or investments in Portugal in terms of tax benefits are better to reconsider their plans. This is because Antonio Mendoça Mendes, national deputy minister for finance and tax affairs, stated that cryptocurrencies are more complex than just applying capital gain tax during the same parliamentary session.9 This statement may be a foreshadowing for the applications of value-added tax and stamp duty in the cases where cryptocurrency is involved.10
What’s next?
Considering that Minister Medina did not set a time limit for the taxation of crypto, but the approach of the country’s minister of finance is clear against crypto being free of tax. In other words, the thing that was rejected last week was not the taxation of crypto in Portugal, but how the taxation was planned.
It is evident from the statements and general stance of the Government and the Parliament that the crypto will be taxed in Portugal. However, it is not certain on a deeper level how and at which rate the crypto will be taxed.
So, turning back to the title of this post, this rejection does not seem to be a redirection for Portugal’s crypto tax strategy but rather a delay in the same direction.
1- Euronews and AFP: Portugal will close a legal loophole to start taxing cryptocurrencies, says its finance minister, May 19, 2022, accessed via https://www.euronews.com/next/2022/05/19/portugal-will-close-a-legal-loophole-to-start-taxing-cryptocurrencies-says-finance-ministe on June 1, 2022.
2- Engler, Andres: Portuguese Congress Rejects Two Bills Seeking to Tax Crypto, May 26, 2022, accessed via https://www.coindesk.com/policy/2022/05/26/portuguese-congress-rejects-two-bills-seeking-to-tax-crypto/ on May 31, 2022.
3- Knight, Oliver: Portugal Makes U-Turn on Cryptocurrency Tax, May 16, 2022, accessed via https://www.coindesk.com/policy/2022/05/16/portugal-makes-u-turn-on-cryptocurrency-tax/ on May 31, 2022.
4- Lutz, Sander: Portugal’s Status as a Crypto Tax Haven Appears to Be Ending, May 16, 2022, accessed via https://decrypt.co/100549/portugals-status-as-a-crypto-tax-haven-appears-to-be-ending on June 1, 2022.
5- Euronews and AFP: Portugal will close a legal loophole to start taxing cryptocurrencies, says its finance minister, May 19, 2022, accessed via https://www.euronews.com/next/2022/05/19/portugal-will-close-a-legal-loophole-to-start-taxing-cryptocurrencies-says-finance-ministe on June 1, 2022.
6- Engler, Andres: Portuguese Congress Rejects Two Bills Seeking to Tax Crypto, May 26, 2022, accessed via https://www.coindesk.com/policy/2022/05/26/portuguese-congress-rejects-two-bills-seeking-to-tax-crypto/ on May 31, 2022; Moura, Catarina: Portugal’s Parliament rejects crypto tax proposals amidst budget negotiations, May 25, 2022, accessed via https://www.theblockcrypto.com/linked/148806/portugals-parliament-rejects-crypto-tax-proposals-amidst-budget-negotiations on June 1, 2022.
7- Engler, Andres: Portuguese Congress Rejects Two Bills Seeking to Tax Crypto, May 26, 2022, accessed via https://www.coindesk.com/policy/2022/05/26/portuguese-congress-rejects-two-bills-seeking-to-tax-crypto/ on May 31, 2022.
8- Moura, Catarina: Portugal’s Parliament rejects crypto tax proposals amidst budget negotiations, May 25, 2022, accessed via https://www.theblockcrypto.com/linked/148806/portugals-parliament-rejects-crypto-tax-proposals-amidst-budget-negotiations on June 1, 2022.
9-Di Salvo, Mat: Portugal’s Parliament Says No to Bitcoin Tax—for Now, May 26, 2022, accessed via https://decrypt.co/101381/portugals-parliament-says-no-bitcoin-tax-for-now on June 1, 2022.
10- Di Salvo, Mat: Portugal’s Parliament Says No to Bitcoin Tax—for Now, May 26, 2022, accessed via https://decrypt.co/101381/portugals-parliament-says-no-bitcoin-tax-for-now on June 1, 2022.
